10-K

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934 for the fiscal year ended December 31, 1999 or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 for the transition period from __________________ to
    __________________ .

                         COMMISSION FILE NUMBER 0-27718

                            NEOSE TECHNOLOGIES, INC.
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             (Exact name of registrant as specified in its charter)

                    DELAWARE                          13-3549286
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        (State or other jurisdiction of            (I.R.S. Employer
         incorporation or organization)           Identification No.)

     102 WITMER ROAD, HORSHAM, PENNSYLVANIA             19044
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    (Address of principal executive offices)          (Zip Code)

       Registrant's telephone number, including area code: (215) 441-5890

          Securities registered pursuant to Section 12(b) of the Act:

                                            
                    NONE                                           NONE
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             Title of each Class                 Name of each exchange on which registered



          Securities registered pursuant to Section 12(g) of the Act:

PREFERRED SHARE PURCHASE RIGHTS   COMMON STOCK, PAR VALUE $.01 PER SHARE
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        (Title of class)                     (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes / /  No / /

     As of February 22, 2000, the aggregate market value of the Common Stock
held by non-affiliates of the registrant was $261,438,695. Such aggregate market
value was computed by reference to the closing sale price of the Common Stock as
reported on the National Market segment of The Nasdaq Stock Market on such date.
For purposes of making this calculation only, the registrant has defined
affiliates as including all directors and executive officers of the Company.

     As of February 22, 2000, there were 11,488,212 shares of the registrant's
Common Stock outstanding.

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this Annual Report on Form 10-K or any amendment to
this Annual Report on Form 10-K. / /

                      DOCUMENTS INCORPORATED BY REFERENCE

     As stated in Part III of this Annual Report on Form 10-K, portions of the
registrant's definitive proxy statement for the registrant's 1999 Annual Meeting
of Stockholders are incorporated by reference in Part III of this Annual Report
on Form 10-K.
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                               TABLE OF CONTENTS

                                     PART I



                                                                               PAGE
                                                                               ----
                                                                         
ITEM 1.          Business....................................................    1

ITEM 2.          Properties..................................................   20

ITEM 3.          Legal proceedings...........................................   20

ITEM 4.          Submission Of Matters To A Vote Of Security Holders.........   20

                                      PART II

ITEM 5.          Market For Registrant's Common Equity And Related
                 Stockholder Matters.........................................   21

ITEM 6.          Selected Consolidated Historical Financial Data.............   22

ITEM 7.          Management's Discussion And Analysis Of Financial Condition
                 And Results Of Operations...................................   23

ITEM 7A.         Quantitative and Qualitative Disclosure About Market Risk...   25

ITEM 8.          Financial Statements And Supplementary Data.................   25

ITEM 9.          Changes In And Disagreements With Accountants On Accounting
                 And Financial Disclosures...................................   25

                                     PART III

ITEM 10.         Directors And Executive Officers Of The Company.............   26

ITEM 11.         Executive Compensation......................................   26

ITEM 12.         Security Ownership Of Certain Beneficial Owners And
                 Management..................................................   26

ITEM 13.         Certain Relationships And Related Transactions..............   26

                                      PART IV

ITEM 14.         Exhibits, Financial Statement Schedules, And Reports On Form
                 8-K.........................................................   26


NEOSE is one of our trademarks. This Form 10-K also includes trademarks and
trade names of other companies.


                                     PART I

ITEM 1.  BUSINESS.

                           FORWARD-LOOKING STATEMENTS

     Some of the statements in this Form 10-K and the Exhibits contain
forward-looking statements within Section 21E of the Securities Exchange Act of
1934, as amended. When used in this Form 10-K and the Exhibits, the words
"anticipate," "believe," "estimate," "may," "expect," and similar expressions
are generally intended to identify forward-looking statements. These
forward-looking statements include, among others, the statements in Management's
Discussion and Analysis about our:

     o expectations for increases in operating expenses;
     o expectations for increases in research and development and general and
       administrative expenses in order to develop new products and manufacture
       commercial quantities of products;
     o expectations for the development, manufacturing, and approval of new
       products;
     o expectations for incurring additional capital expenditures to expand our
       manufacturing capabilities;
     o expectations for generating revenue or becoming profitable on a sustained
       basis;
     o ability to enter into additional marketing agreements and the ability of
       our existing marketing partners to commercialize products incorporating
       our technologies;
     o estimate of the sufficiency of our existing cash and cash equivalents and
       investments to finance our operating and capital requirements;
     o expected losses; and
     o expectations for future capital requirements.

     Our actual results could differ materially from those results expressed in,
or implied by, these forward-looking statements. Potential risks and
uncertainties that could affect our actual results include the following:

     o our ability to commercialize any of our products or technologies;
     o our ability to maintain our existing collaborative arrangements and enter
       into new collaborative arrangements;
     o our ability to develop commercial-scale manufacturing facilities;
     o our ability to protect our proprietary products, know-how, and
       manufacturing processes;
     o unanticipated cash requirements to support current operations or research
       and development;
     o the timing and extent of funding requirements for the joint venture's
       activities;
     o our ability to attract and retain key personnel; and
     o general economic conditions.

     These and other risks and uncertainties that could affect our actual
results are discussed in greater detail in this Form 10-K. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, events, levels of activity,
performance, or achievements. We do not assume responsibility for the accuracy
and completeness of the forward-looking statements.

     We do not intend to update any of the forward-looking statements after the
date of this Form 10-K to conform them to actual results.

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                                  RISK FACTORS

     You should carefully consider the risks and uncertainties. If any of the
following occurs, our business, financial condition, or operating results could
be materially harmed. This could cause the trading price of our common stock to
decline, and you may lose all or part of your investment.

                         RISKS RELATED TO OUR BUSINESS

WE HAVE NOT YET COMMERCIALIZED ANY PRODUCTS OR TECHNOLOGIES, AND WE MAY NEVER
BECOME PROFITABLE.

     We currently have no material revenues. Although we began operations in
1990, we have not generated any revenues from operations, except for interest
income and revenues from collaborative agreements. We have not yet
commercialized any products or technologies and we cannot be sure that we will
ever be able to do so. Even if we commercialize one or more of our products or
technologies, we may not become profitable. Our ability to achieve profitability
is dependent on a number of factors, including our ability to complete our
development efforts, obtain regulatory approval for our product candidates, and
commercialize successfully those product candidates or our technologies.

WE HAVE A HISTORY OF OPERATING LOSSES, AND WE MAY INCUR CONTINUED LOSSES FOR
SOME TIME.

     We have incurred operating losses each year and, given our planned level of
operating expenses, we may continue to incur operating losses for some time. As
of December 31, 1999, we had an accumulated deficit of approximately $60
million. We expect additional losses for some time as we expand research and
development efforts, expand manufacturing scale-up activities, and begin sales
and marketing activities. We may continue to incur substantial operating losses
even if our revenues increase. As a result, we cannot predict the extent of
future losses or the time required for us to achieve profitability, if at all.

OUR TECHNOLOGIES MAY PROVE TO BE INEFFECTIVE, OR IT MAY BE YEARS, IF EVER,
BEFORE WE CAN DEVELOP AND COMMERCIALIZE OUR PRODUCTS.

     Our technology involves new and unproven approaches. We are developing
processes based on our enzymatic carbohydrate synthesis technology platform to
manufacture complex carbohydrates. We are using these manufacturing processes to
discover, develop, and commercialize complex carbohydrates for pharmaceutical,
biotechnology, nutritional, and consumer product applications. Most complex
carbohydrates sold today are derived from natural sources. There has been only
very limited development and commercialization of synthesized complex
carbohydrates, in part because of manufacturing limitations. We may face
obstacles and difficulties unknown to us today. In addition, we may incur costs
that we did not expect, and the costs associated with manufacturing commercial
quantities of synthesized complex carbohydrates may make commercialization
unprofitable. We may fail to overcome the difficulties posed in manufacturing
synthesized complex carbohydrates, or complete successfully all the other
activities required to commercialize any synthesized complex carbohydrate.

     To date, we have not entered into any major collaboration agreements
involving our glycoprotein remodeling technology. We also may find that our
glycoprotein remodeling technology fails to improve drug properties or is not
scaleable into commercial production processes. Either of these would prevent
our technology from being adopted by the biopharmaceutical industry.

OUR SUCCESS DEPENDS UPON OUR COLLABORATIVE RELATIONSHIPS.

     We have collaborative agreements with Bristol-Myers, McNeil, and Wyeth. We
have committed significant resources and costs in the expectation that these
collaborations will become profitable in the future. Each of these collaborative
agreements presents risks to us as described below.

     Bristol-Myers.  Our agreement with Bristol-Myers requires us to develop
proprietary processes for the manufacture of complex carbohydrates for two
cancer vaccines being developed by Bristol-Myers. We may be unable to complete
this development successfully. Even if we successfully complete development

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of these processes and fulfill all of our obligations under the agreement,
Bristol-Myers may not obtain regulatory approval to market either of these
vaccines. Further, even if Bristol-Myers obtains regulatory approval to market
either of these vaccines, we cannot be sure that Bristol-Myers will enter into a
manufacturing contract with us, that the terms of a future contract with
Bristol-Myers will be favorable to us, or that either vaccine will be
commercially successful.

     McNeil.  The success of our joint venture with McNeil is dependent upon the
joint venture's ability to manufacture, sell, and market successfully complex
carbohydrates. If the joint venture is unsuccessful in these efforts, it will
not be profitable and our business, financial condition, and results of
operations will be materially and adversely affected.

     Wyeth.  Our agreement with Wyeth requires us to develop a large-scale
manufacturing process for a potential ingredient of infant formula. We may be
unable to complete this development successfully. Even if we successfully
develop a process and fulfill all of our obligations under the agreement, Wyeth
may fail to obtain regulatory approval to market the ingredient. Moreover, even
if Wyeth obtains regulatory approval for the ingredient, Wyeth may determine not
to add the ingredient to its products.

     Our business strategy also contemplates entering into additional
collaborative agreements with pharmaceutical and other companies. We have
limited experience in marketing our technology platform to collaborators. We
cannot be sure that our collaborators will share our perspective on the relative
importance of our program, that they will commit sufficient resources to our
program to move it forward effectively, or that the program will advance as
rapidly as it might if we had retained complete control of all research,
development, regulatory, and commercialization decisions. Our collaborative
agreements are generally terminable by our partners on short notice. Suspension
or termination of collaborative agreements could have a material and adverse
impact on our business, financial conditions, and results of operations.

WE MAY BE REQUIRED TO MAKE ADDITIONAL CAPITAL CONTRIBUTIONS TO OUR JOINT VENTURE
WITH MCNEIL.

     Under the terms of our joint venture with McNeil, we may be required to
make additional capital contributions to fund capital expenditures. If the joint
venture builds additional production facilities, and we wish to maintain our 50%
ownership in the joint venture, we are required to contribute half of the
expenditures, up to a maximum contribution of $8.85 million. However, we may
elect to contribute as little as $1.85 million of the cost of the expenditures,
so long as our aggregate capital contributions are at least 15% of the joint
venture's aggregate capital contributions. In that case, McNeil will fund the
remainder of our half of the joint venture's capital expenditures, and our
ownership percentage will be appropriately reduced. We have an option, expiring
in September 2006, to return to 50% ownership in the joint venture by
reimbursing McNeil. We cannot be sure, however, that we will have adequate
resources, either at the time of a required contribution or prior to the
expiration of the option, to make contributions to the joint venture. If we are
unable to make these contributions, our ownership interest will be
proportionately reduced.

WE HAVE LIMITED COMMERCIAL MANUFACTURING CAPABILITY AND EXPERIENCE, AND WE MAY
BE UNABLE TO MEET DEMAND FOR OUR PRODUCTS.

     Our success depends on our ability to manufacture complex carbohydrates on
a commercial scale and in accordance with current Good Manufacturing Practices,
or cGMP, prescribed by the United States Food and Drug Administration, or FDA.
Our existing facility is not certified cGMP by the FDA and is not adequate for
large-scale, commercial manufacturing of all our products. Therefore, we will
need to develop commercial-scale manufacturing facilities meeting cGMP, or
depend on our collaborators, licensees, or contract manufacturers for the
commercial manufacture of our potential products.

     The expansion of our manufacturing capacity will require additional funds
and personnel, and compliance with applicable regulations. We may be unable to
design, build, or operate additional facilities, and we may be unable to find
collaborators, licensees, or contract manufacturers to manufacture products in
commercial quantities for sale at competitive prices. In addition to the normal
scale-up risks associated with any manufacturing process, we may face
unanticipated problems unique to carbohydrate manufacture.

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     Any facility we may operate, or any contract manufacturers that we may use,
must adhere to the FDA's regulations on cGMP, which are enforced by the FDA
through its facilities inspection program. These facilities must pass a plant
inspection before the FDA will grant marketing approval for the product. The
manufacture of product at these facilities will be subject to strict quality
control, testing, and record keeping requirements, and continuing obligations
regarding the submission of safety reports and other post-market information.
Ultimately, we, or our contract manufacturers, may be unable to secure or
maintain cGMP approvals.

     If we encounter delays or difficulties in connection with our manufacture
of products or with contract manufacturers, packagers, or distributors, market
introduction and subsequent sales of our products could be delayed. In addition,
we may need to seek alternative sources of supply. If so, we may incur
additional costs or delays in product commercialization. If we change the source
or location of supply or modify the manufacturing process, regulatory
authorities will require us to demonstrate that the product produced by the new
source or from the modified process is equivalent to the product used in any
clinical trials that we had conducted.

THE FAILURE TO OBTAIN OR MAINTAIN ADEQUATE PATENTS, AND OTHER INTELLECTUAL
PROPERTY PROTECTION, COULD IMPACT OUR ABILITY TO COMPETE EFFECTIVELY.

     Our success will depend in part on our ability to obtain commercially
valuable patent claims and to protect our intellectual property. Our patent
position is generally uncertain and involves complex legal and factual
questions. Legal standards relating to the validity and scope of claims in our
technology field are still evolving. Therefore, the degree of future protection
for our proprietary rights is uncertain. The risks and uncertainties that we
face with respect to our patents and other proprietary rights include the
following:

     o the pending patent applications we have filed or to which we have
       exclusive rights may not result in issued patents or may take longer than
       we expect to result in issued patents;
     o the claims of any patents that are issued may not provide meaningful
       protection;
     o we may not be able to develop additional proprietary technologies that
       are patentable;
     o the patents licensed or issued to us or our customers may not provide a
       competitive advantage;
     o other companies may challenge patents licensed or issued to us or our
       customers;
     o other companies may independently develop similar or alternative
       technologies, or duplicate our technologies; and
     o other companies may design around technologies we have licensed or
       developed.

     We own patents and patent applications, and have licensed patents and
patent applications from a number of institutions. If we commercialize any
products manufactured by use of technology licensed from another party, we will
be required to make payments as specified in the applicable license agreement.
Our business, financial condition, and results of operations may be materially
and adversely affected if any of these agreements is terminated.

     We may incur substantial costs in asserting any patent rights and in
defending suits against us relating to intellectual property rights. Such
disputes could substantially delay our product development or commercialization
activities. The United States Patent and Trademark Office or a private party
could institute an interference proceeding relating to our patents or our patent
applications. An adverse decision in any such proceeding could result in the
loss of our intellectual property rights.

     To facilitate development of our proprietary technology base, we may need
to obtain licenses to patents or other proprietary rights from other parties. If
we are unable to obtain such licenses, or obtain such licenses on what we
consider to be acceptable terms, our research and development efforts may be
delayed.

     Some of our proprietary rights have been licensed to us under agreements
that have performance requirements or other contingencies. The failure to comply
with these provisions could lead to termination or modifications of our rights
to these licenses.

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     In addition to patents and patent applications, we depend upon trade
secrets and proprietary know-how to protect our proprietary technology. We
require all employees, consultants, advisors, and collaborators to enter into
confidentiality agreements that prohibit the disclosure of confidential
information to any other parties. We require that our employees and consultants
disclose and assign to us their ideas, developments, discoveries, and
inventions. These agreements may not, however, provide adequate protection for
our trade secrets, know-how, or other proprietary information in the event of
any unauthorized use or disclosure.

INTERNATIONAL PATENT PROTECTION IS UNCERTAIN.

     Patent law outside the United States is uncertain and is currently
undergoing review and revision in many countries. Further, the laws of some
foreign countries may not protect our intellectual property rights to the same
extent as U.S. laws. We may participate in opposition proceedings to determine
the validity of our or our competitors' foreign patents, which could result in
substantial costs and diversion of our efforts. Finally, some of our patent
protection in the United States is not available to us in foreign countries due
to the laws of those countries.

WE ARE EXPOSED TO INTENSE COMPETITION FROM MANY SOURCES. WE OPERATE IN AN
ENVIRONMENT OF RAPID TECHNOLOGICAL CHANGE, AND WE MAY FALL BEHIND OUR
COMPETITORS.

     Some companies are producing by enzymatic and other means a limited variety
of complex carbohydrates. Although we do not believe any of these companies
currently has the ability to manufacture a wide variety of human carbohydrate
products in quantities sufficient for commercialization, any of these companies
may develop technologies superior to our technologies. In addition, some
companies are investigating novel methods of chemical synthesis, sometimes with
enzymatic steps, to produce commercial quantities of complex carbohydrates.
These and other efforts by potential competitors may be successful or other
methods of carbohydrate synthesis which compete with our technologies may be
developed.

     Our potential competitors include nutritional products, pharmaceutical,
chemical, biotechnology, food, and consumer product companies. Many of these
companies have more:

     o financial, scientific, and technical resources;
     o manufacturing and marketing capabilities;
     o experience conducting preclinical studies and clinical trials of new
       products; and
     o experience in obtaining regulatory approvals for products.

     Competitors may succeed in developing products and technology that are more
effective and less costly than we may develop, or that would render our
technology or products, or both, obsolete or noncompetitive. Competitors also
may prove to be more successful in the manufacturing and marketing of products.
If we are unable to compete against our competitors, our commercial
opportunities will be reduced or diminished.

IF WE FAIL TO RETAIN MEMBERS OF OUR SENIOR MANAGEMENT, WE MAY BE UNABLE TO
ACHIEVE SUCCESS IN OUR RESEARCH AND PRODUCT DEVELOPMENT PROGRAMS.

     We depend upon the efforts of our senior management, in particular Dr.
Stephen Roth, our Chief Executive Officer. Dr. Roth has entered into a
non-competition agreement, under which he has agreed not to compete with us
during his employment, and following his employment so long as we pay him
compensation to be mutually agreed upon at the time of his termination. If we
cannot reach an agreement with Dr. Roth at that time, and he competes with us,
we may be unable to achieve our development objectives.

WE MAY BE UNABLE TO RETAIN KEY EMPLOYEES OR RECRUIT ADDITIONAL QUALIFIED
PERSONNEL.

     Because of the specialized scientific nature of our business, we are highly
dependent upon qualified scientific, technical, and managerial personnel. There
is intense competition for qualified personnel in our business. Therefore, we
may not be able to attract and retain the qualified personnel necessary for the

                                       5


development of our business. The loss of the services of existing personnel, as
well as the failure to recruit additional key scientific, technical, and
managerial personnel in a timely manner would harm our research and development
programs and our business.

WE ARE EXPOSED TO PRODUCT LIABILITY AND RELATED RISKS.

     The administration of drugs to humans, whether in clinical trials or
commercially, can result in product liability claims even if our drugs or a
collaborator's drugs are not actually at fault for causing an injury.
Furthermore, our products may cause, or may appear to cause, adverse side
effects or potentially dangerous drug interactions that we may not learn about
or understand fully until the drug is actually manufactured and sold. Product
liability claims can be expensive to defend, and may result in large judgments
against us or settlements. Even if a product liability claim is not successful,
the adverse publicity, time, and expense involved in defending such a claim may
interfere with our business. We have no product liability insurance coverage for
our clinical trials, and we may not be able to obtain insurance coverage at a
reasonable cost or in sufficient amounts to protect us against losses.

ANY FUTURE ACQUISITIONS WILL CREATE RISKS AND UNCERTAINTIES.

     As part of our business strategy, we may acquire other assets,
technologies, and businesses. We cannot be sure, however, that acquisition
candidates will be available on terms acceptable to us. Future acquisitions that
we may complete involve risks such as the following:

     o we may be exposed to unknown liabilities of acquired companies;
     o our acquisition and integration costs may be higher than we anticipated;
     o integrating or completing the development and application of acquired
       technologies may disrupt our business and divert management's time and
       attention;
     o we may be unable to retain key employees of the acquired businesses; and
     o our stockholders' ownership may be diluted if we pay for the acquisition
       with equity securities.

                     RISKS RELATED TO GOVERNMENT APPROVALS

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION, AND WE OR OUR COLLABORATORS
MAY NOT OBTAIN NECESSARY REGULATORY APPROVALS.

     The research, development, manufacture, marketing, and sale of product
candidates manufactured using our technology are subject to varying degrees of
regulation by a number of government authorities in the United States and other
countries.

Regulation of Pharmaceutical Products

     Pharmaceutical product candidates manufactured using our technology must
undergo an extensive regulatory approval process before commercialization. This
process is regulated by the FDA and by comparable agencies in other countries.
Our products, and products employing our technology, are regulated in the United
States in accordance with the federal Food, Drug and Cosmetic Act, the Public
Health Service Act, and other laws. If the product is regulated as a biologic,
such as the cancer vaccines being developed by Bristol-Myers, the FDA Center for
Biologics Evaluation and Research, or CBER, will require the submission and
approval of a Biologic License Application, or BLA, before commercial marketing.
The BLA process generally requires:

     o expensive and time-consuming preclinical studies and clinical trials to
       establish the safety, potency, purity, and effectiveness of each compound
       to be submitted with the FDA;
     o compliance with FDA good laboratory, clinical, and manufacturing
       practices during testing and manufacturing; and
     o continued FDA oversight of product and promotion after marketing approval
       is obtained.

It may be many years, if ever, until regulatory approval is obtained.

                                       6


     Each manufacturer of drugs or biologics must be registered with the FDA and
pass an inspection by the FDA prior to approval to manufacture products for
commercial distribution. Failure to pass the inspection results in not receiving
approval to market products.

     Our glycoprotein remodeling technology will require submission of Drug
Master Files with CBER for the production of recombinant therapeutic
glycoproteins. If we or our collaborators fail to comply with all applicable
regulatory requirements, the following delays or regulatory action could result:

     o warning letters;
     o fines;
     o product recalls or seizures;
     o operating restrictions;
     o refusal of the FDA to complete review of pending market approval
       applications or supplements to approval applications;
     o withdrawal of previously approved product approvals;
     o civil penalties; and
     o criminal prosecution.

     We have not submitted, and we may never submit, any pharmaceutical product
candidates for marketing approval to the FDA, or any other regulatory authority.
In addition, Bristol-Myers has not submitted, and may never submit, its vaccines
for marketing approval to the FDA, or any other regulatory authority.

     If any product manufactured using our technology is submitted for
regulatory approval, it may not receive either the approvals necessary for
commercialization, the desired labeling claims, or coverage or adequate levels
of reimbursement under federal, state, or private healthcare insurance
providers. Any delay in receiving, or failure to receive, these approvals would
adversely affect our ability to generate product revenues or royalties. Even if
all requisite approvals were granted, these approvals may entail commercially
unacceptable limitations on the labeling claims. In addition, once an approval
is granted, both a marketed drug or compound and the manufacturer are subject to
continual review and inspection. Later discovery of previously unknown problems
with a product or manufacturer may result in restrictions or regulatory action
against the product or manufacturer, including withdrawal of the product from
the market. Additional governmental regulations may delay or alter regulatory
approval of any product candidate manufactured using our technology. We cannot
predict the impact of adverse governmental action that might arise from future
legislative and administrative action.

Regulation of Foods and Food Ingredients

     We expect that many of the products of our joint venture with McNeil will
be food ingredients, including FOS and other bulking agents and nutraceutical
food additives. Foods and food ingredients are subject to the provisions of the
federal Food, Drug and Cosmetic Act. Food ingredients are broadly defined as any
substances that may become a component, or otherwise affect the characteristics,
of food. Food ingredients or ingredients used in animal feed are regulated
either as substances generally recognized as safe, or GRAS, or as food
additives.

     Food ingredients that are GRAS are excluded from the definition of food
additives. The FDA has affirmed by regulation a number of substances as GRAS,
although it is not required that a substance be affirmed as GRAS by regulation
of the FDA in order to be GRAS. A manufacturer may self-affirm a substance as
GRAS by making an independent determination that qualified experts would
generally agree that the substance is GRAS for a particular use. If the FDA
disagrees with a determination, the manufacturer must complete the food additive
petition process for the substance to be approved by the FDA. Affirmation of
GRAS status either by the manufacturer or regulation of the FDA would allow the
manufacturer to market and sell the additive or the food containing the
additive. Furthermore, a manufacturer's decision to rely on an independent
determination may limit the marketability of that manufacturer's products to
food manufacturers, many of whom require confirmation of GRAS status from the
FDA before they will purchase substances for use in foods from third parties.

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     Food ingredients that are not GRAS are regulated as food additives. All new
food additives require FDA approval prior to commercialization. Information
supporting the safety of a food additive is submitted to the FDA in the form of
a food additive petition. The food additive petition process is generally
expensive and lengthy. Commercialization of the food additive, if permitted by
the FDA, often occurs several years after the petition is submitted to the FDA.
The petition must establish with reasonable certainty that the food additive is
safe for its intended use at the level specified in the petition. The petition
is required to contain reports of safety investigations of the food additive and
details regarding its physical, chemical, and biological properties. Product
safety studies submitted to the FDA are typically conducted in accordance with
FDA good laboratory practices requirements. If a food additive petition is
submitted, the FDA may choose to reject the petition or deny any desired
labeling claims. Furthermore, the FDA may require the establishment of
regulations that necessitate costly and time-consuming compliance procedures.

Regulation of Infant Formula Additives

     We are collaborating with Wyeth to develop an additive to infant formula.
The manufacture, composition, and labeling of infant formulas are subject to the
provisions of the United States Infant Formula Act. Prior to commercializing any
potential infant formula additive, an infant formula manufacturer must
demonstrate that its potential additive:

     o is GRAS by previous regulation of the FDA, or is self-affirmed as GRAS by
       the infant formula manufacturer; or
     o is the subject of an approved food additive petition.

     Under the United States Infant Formula Act, infant formula manufacturers
are required to notify the FDA of any intent to revise, add, or substitute any
protein, fat, or carbohydrate in infant formula ninety days prior to the
intended date of commercial distribution. During that ninety-day period, the FDA
may request additional information, or deny marketing rights for the new
formula. Wyeth is responsible for all regulatory activities relating to the
infant formula additive. They have not yet made, and may never make, any filings
with the FDA to propose inclusion of an infant formula additive manufactured
using our technology. Furthermore, Wyeth may not self-affirm GRAS status of the
potential infant formula additive, impairing their efforts to commercialize the
infant formula additive.

     Wyeth may market infant formula containing the additive in foreign
countries. Infant formula regulatory requirements vary widely from country to
country, and may be more or less stringent than the FDA requirements. The time
required to obtain clearances, if required, in foreign countries may be longer
or shorter than that required in the United States.

WE USE HAZARDOUS MATERIALS IN OUR OPERATIONS THAT MAY SUBJECT US TO AN
ENVIRONMENTAL CLAIM OR LIABILITY.

     Our research and development processes involve the controlled use of
hazardous materials, chemicals, and radioactive compounds. The risk of
accidental injury or contamination from these materials cannot be entirely
eliminated. We do not maintain a separate insurance policy for these types of
risks. In the event of an accident or environmental discharge, we may be held
liable for any resulting damages, and any liability could exceed our resources.
We are subject to federal, state, and local laws and regulations governing the
use, storage, handling, and disposal of these materials and specified waste
products. The cost of compliance with these laws and regulations could be
significant.

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                                    BUSINESS

OVERVIEW

     We are a leading developer of proprietary technologies for the synthesis
and manufacture of complex carbohydrates. Complex carbohydrates are critically
important molecules in biological processes. On cell surfaces, they regulate
communications with other cells, hormones, nutrients, and growth and death
factors. Traditionally, complex carbohydrates have been difficult and expensive
to produce in commercial quantities. Our proprietary enzymatic technology
platform offers a unique approach that enables the rapid and cost-effective
synthesis of a wide range of complex carbohydrates. We use our broad, enabling
technology to produce complex carbohydrates for pharmaceutical, biotechnology,
nutritional, and consumer product applications.

     Cancer vaccines based on carbohydrates are one biopharmaceutical
application that could be enabled by our carbohydrate technology platform. We
are collaborating with Bristol-Myers Squibb Company to develop a commercial
manufacturing process for the ganglioside components in two therapeutic cancer
vaccines licensed to Bristol-Myers from Progenics Pharmaceuticals.

     We are also developing novel applications of our technologies for large
nutritional and consumer product markets. In 1999, we entered into a joint
venture with the McNeil Specialty Products Division of Johnson & Johnson to
manufacture and market FOS and other complex carbohydrates, including
nutraceutical food additives, bulking agents for McNeil's sucralose sweetener,
and other related compounds. We believe that the joint venture's technologies
can yield products that are cleaner, more consistent, and significantly less
expensive than identical products derived from agricultural sources. In 1999, we
also entered into a collaboration agreement with Wyeth Nutritionals
International, a division of American Home Products, enabling Wyeth to use our
platform technology to develop and produce a bioactive carbohydrate for use in
infant and pediatric nutritional formulas.

     GlycoAdvance(TM), another application of our technology platform, is used
to complete and correct critical portions of therapeutic glycoproteins, which
are proteins that include carbohydrate structures. We believe that GlycoAdvance
may permit the continued development of some drugs by overcoming efficacy and
side effect problems related to incomplete carbohydrate structures. Many
biotechnology drugs on the market or in development are glycoproteins, and their
associated carbohydrates are often critical to the function of the protein.
Current techniques to produce glycoproteins frequently yield incomplete or
incorrect complex carbohydrates, leading to problems such as decreased efficacy,
adverse reactions, and manufacturing inefficiencies. Our GlycoAdvance technology
uses our proprietary enzymes to add or remodel therapeutic glycoproteins to
incorporate the proper human sugars in an efficient and flexible system.
Examples of glycoprotein therapeutics currently on the market include
erythropoietins and interferons. The top eight glycoprotein drugs accounted for
more than $6.7 billion in estimated 1999 sales. There are more than 200
glycoprotein drugs currently in development. We believe that the use of
GlycoAdvance technology for the production of human therapeutic glycoproteins
may result in an improved pharmacokinetic profile, potentially strengthened
patent claims, and significant manufacturing efficiencies.

COMPLEX CARBOHYDRATES

     Complex carbohydrates are chains of simple sugar molecules that can be
joined in many different combinations. For example, four different
monosaccharides can be arranged to make approximately 36,000 different complex
carbohydrates. In contrast, the assembly of amino acids into proteins is much
simpler than the assembly of simple sugar molecules. For example, four different
amino acids can be combined to make a total of 24 distinct peptides.

     Complex carbohydrates are critically important molecules in biological
processes. On cell surfaces, they regulate communications with other cells,
hormones, nutrients, and growth and death factors. For example, the majority of
cancers are characterized by complex carbohydrate irregularities on the cell
surface that have been implicated in the process of tumor growth and metastatic
disease. Complex carbohydrates also serve as the primary source of nutrition for
all cells in all organisms.


                                       9




     Carbohydrates are also joined together with other types of compounds. For
example, complex carbohydrates can be joined to lipids, as they are in
therapeutic cancer vaccines, and to proteins called glycoproteins. Many
biotechnology drugs on the market or in development are glycoproteins, and their
associated carbohydrates are often critical to the pharmacokinetics of proteins.

Traditional Methods

     Simple sugars can be linked in many different combinations, with each
combination potentially having a different biological activity. Chemical
synthesis of complex carbohydrates is difficult, time consuming, prohibitively
expensive, and becomes more complex as the length of a chain increases. Most
commercial complex carbohydrates are extracted from plants, which can be an
unreliable source due to supply problems created by weather, political
instability, contamination, and product inconsistency. Complex carbohydrates
developed for pharmaceutical use are purified from animal sources; for example,
heparin, a multi-billion dollar per year pharmaceutical product, is now derived
largely from pig intestines. Some of these animal sources may not be desirable
from a regulatory or safety perspective.

     Glycoproteins are currently produced in non-human mammalian cell expression
systems. Current methods often results in incomplete or incorrect glycosylation.
Glycosylation refers both to the linkage pattern of carbohydrate molecules, and
to the process of creating or modifying these linkages. The impact of incomplete
or incorrect glycosylation includes reduced half-life of the injected drug,
increased dosing level or frequency, and increased immunogenicity. Incomplete
glycosylation can also result in production inefficiencies, including lower
production yields, higher purification costs, and increased capital and
facilities requirements. Conventional methods of solving these problems of
incomplete or incorrect glycosylation include choice of cell types for use in
cell expression systems, cell re-engineering, cell culture media optimization,
and purification of the most complete glycoforms during recovery. These
approaches are expensive and ineffective.

Our Enzymatic Glycosylation Technology

     Our proprietary enzymatic glycosylation technology is applicable to all
natural complex carbohydrates, and makes feasible the rapid and cost-effective
synthesis of commercial quantities of a wide range of complex carbohydrates. Our
methods can produce complex carbohydrates that are attached to lipids, as in
therapeutic cancer vaccines, are attached to proteins, as in recombinant
therapeutic glycoproteins, or are solely carbohydrates, as found in human breast
milk.

     Our manufacturing methods offer an alternative to unpredictable, scarce, or
undesirable natural sources and to cumbersome, expensive, and time consuming
chemical synthesis of complex carbohydrates. Although identical to natural
compounds, enzymatically-produced complex carbohydrates are cleaner and more
homogeneous. Our technology is also capable of correcting or completing the
human carbohydrate patterns on glycoproteins, potentially resulting in improved
pharmacokinetic profiles and manufacturing efficiencies.

     Our proprietary enzymatic technology synthesizes specific chemical linkages
among individual sugar molecules. These enzymes, which are referred to as
glycosyltransferases, are catalysts that link sugars together in highly specific
ways. Glycosyltransferases synthesize linkages rapidly, efficiently, and can be
used continuously for months before replacement. We have developed recombinant
methods of producing the glycosyltransferases necessary to manufacture many
naturally occurring complex carbohydrates.

     Our glycosylation synthesis technology leadership position was enhanced
significantly by our acquisition of related technologies from Cytel Corporation
in 1999. While we had been primarily focused on the use of multiple
glycosyltransferases to link simple sugars, Cytel was focused primarily on other
enzymes. We have identified areas of Cytel's technology that, coupled with our
existing synthesis technology, have significantly broadened our enzymatic
glycosylation technology platform.


                                       10




OUR STRATEGY

     Our strategy is to enhance our position as the leading developer of
technologies for the synthesis and manufacture of complex carbohydrates. The
following are the key elements of our strategy:

     o Strengthen Our Technology Leadership Position in Carbohydrate
       Manufacture.  We have a leadership position in cost-effective production
       methods for a variety of complex carbohydrates. We expect to continue our
       internal efforts in research and development, to pursue in-licensing
       opportunities, sponsor academic research, and to acquire complementary
       technologies. Our acquisition of closely related technologies from Cytel
       Corporation during 1999 enabled us to broaden our technology platform.

     o Leverage the Use of Our Technologies in the Pharmaceutical and
       Biotechnology Markets.  Our collaborative agreement with Bristol-Myers
       illustrates our enabling technology's applicability to the development of
       biopharmaceutical therapeutics. In addition, we are currently using our
       GlycoAdvance glycoprotein remodeling technology to modify glycoproteins,
       on an evaluative basis, for a number of major biopharmaceutical
       companies. We are seeking additional collaborations with both
       biotechnology and pharmaceutical firms to incorporate our GlycoAdvance
       technology into their drug development programs.

     o Expand the Use of Our Technologies in the Nutritional and Consumer
       Product Markets.  Our existing joint venture, collaborative, and
       licensing relationships with McNeil and Wyeth demonstrate our ability to
       extend our technology platform into additional markets. We are seeking
       additional collaborations for the development of other nutritional and
       consumer applications.


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OUR MAJOR PROJECTS

     We are using our broad, enabling technology to produce complex
carbohydrates for a variety of product candidates. The table below lists major
projects under development that use applications of our technology platform:



- -------------------------------------------------------------------------------------------------------------
PRODUCT APPLICATION          | TYPE OF COMPOUND      | COLLABORATOR          | STATUS                       |
- -------------------------------------------------------------------------------------------------------------
                                                                     
PHARMACEUTICAL AND           |                       |                       |                              |
BIOTECHNOLOGY APPLICATIONS:  |                       |                       |                              |
  Cancer vaccine for         | Ganglioside           | Bristol-Myers Squibb  | Phase III clinical           |
  malignant melanoma         | (glycolipid)          | Company               | trials--We are developing    |
                             |                       |                       | novel proprietary            |
                             |                       |                       | manufacturing processes and  |
                             |                       |                       | expect to be the commercial  |
                             |                       |                       | manufacturer                 |
- -------------------------------------------------------------------------------------------------------------
  Cancer vaccine being       | Ganglioside           | Bristol-Myers         | Phase II clinical trials to  |
  developed for a variety of | (glycolipid)          |                       | begin in early 2000--We are  |
  indications, including     |                       |                       | developing novel proprietary |
  colorectal cancer,         |                       |                       | manufacturing processes and  |
  lymphoma, small cell lung  |                       |                       | expect to be the commercial  |
  cancer, sarcoma, gastric   |                       |                       | manufacturer                 |
  cancer and neuroblastoma   |                       |                       |                              |
- -------------------------------------------------------------------------------------------------------------
  Glycoprotein drugs using   | Therapeutic           | Biopharmaceutical     | We are conducting a number   |
  GlycoAdvance               | glycoproteins with    | companies             | of evaluation projects and   |
                             | correct and complete  |                       | developing long-term         |
                             | glycosylation         |                       | collaboration and licensing  |
                             |                       |                       | opportunities                |
- -------------------------------------------------------------------------------------------------------------
NUTRACEUTICAL AND            |                       |                       |                              |
CONSUMER PRODUCT             |                       |                       |                              |
APPLICATIONS:                |                       |                       |                              |
  Nutritional products:      | FOS and other novel   | McNeil Specialty      | Initial commercial plant to  |
      o Novel bulking agents | complex carbohydrates | Products Division of  | be completed in early 2000;  |
        for sucralose        |                       | Johnson & Johnson     | negotiations with major      |
        sweetener            |                       |                       | potential customers          |
      o Nutraceutical food   |                       |                       | underway; research and       |
        supplements          |                       |                       | development of various new   |
      o Food bulking agents  |                       |                       | products                     |
      o Animal feed          |                       |                       |                              |
        supplements          |                       |                       |                              |
- -------------------------------------------------------------------------------------------------------------
  Oral health products       | Novel complex         | McNeil                | Research collaboration with  |
                             | carbohydrate          |                       | University of Pennsylvania   |
                             |                       |                       | Dental School                |
- -------------------------------------------------------------------------------------------------------------
  Infant nutritional formula | Bioactive carbohydrate| Wyeth Nutritionals    | Research and development     |
  supplement                 |                       | International, a      | collaboration                |
                             |                       | division of American  |                              |
                             |                       | Home Products         |                              |
- -------------------------------------------------------------------------------------------------------------


PHARMACEUTICAL AND BIOTECHNOLOGY APPLICATIONS

Therapeutic Cancer Vaccines

     Under an agreement with Bristol-Myers, we are developing proprietary
technologies that enable cGMP processes for the manufacture of two gangliosides
for use as the active pharmaceutical ingredients in two cancer vaccines being
developed by Bristol-Myers. Both vaccine candidates have been licensed to
Bristol-Myers from Progenics Pharmaceuticals.

                                       12




     The first of these vaccine candidates, GMK, is in Phase III clinical trials
for the treatment of malignant melanoma. We estimate that there are 300,000
melanoma patients in the United States today. The American Cancer Society
estimated that 44,000 new cases of melanoma in the United States were diagnosed
in 1999. The ganglioside GM2 is overexpressed in malignant melanoma cells, and
is being used as an antigen to stimulate the patient's immune system to
eliminate tumor cells. We are developing a complete, synthetic, enzymatic
manufacturing process for the active compound, under cGMP conditions, for use in
clinical trials and for commercial distribution upon approval.

     The second vaccine candidate, MGV, is also being developed for a variety of
other cancer indications, including colorectal cancers, lymphoma, sarcoma, small
cell lung cancer, gastric cancer, and neuroblastoma. The vaccine is based on a
combination of the gangliosides GM2 and GD2, both of which are enriched on the
surfaces of a number of tumor cell types. In addition to the process we are
developing for GM2, we will also use our proprietary technology to develop a
manufacturing process for GD2. We will then produce both GM2 and GD2 for the MGV
vaccine for use in subsequent clinical trials and for commercial use upon
approval.

     Under our current agreements with Bristol-Myers, we expect to be paid for
process development, for the delivery of qualified materials for clinical trial
use, and for stability and other pre-launch needs. If Bristol-Myers proceeds
with GMK or MGV, we expect to enter into a mutually exclusive long-term
manufacturing and supply agreement to provide Bristol-Myers with commercial
requirements for the vaccines.

GlycoAdvance Glycoprotein Remodeling Technology

     Our GlycoAdvance technology uses our proprietary enzymes to add or remodel
therapeutic glycoproteins to incorporate the proper human sugars in an efficient
and flexible system. We believe that GlycoAdvance may permit the continued
development of some drugs by overcoming efficacy and side effect problems
related to incomplete carbohydrate structures. We also believe that the use of
GlycoAdvance in the production of human therapeutic glycoproteins may result in
improved pharmacokinetic profiles, potentially strengthened patent claims, and
significant manufacturing efficiencies. GlycoAdvance can be incorporated easily
into the manufacturer's production system as a post-secretion modification of
the expressed protein. Estimated 1999 sales of the top eight selling
glycoprotein drugs were greater than $6.7 billion. Of the approximately 350
biotechnology drugs currently in development, more than 200 are glycoproteins.
We believe that our glycoprotein remodeling technologies are potentially
applicable to many of these drugs.


                                       13




                                   [GRAPHIC]

            In the printed version of the document a graph appears:

The glycoprotein depicted in Figure 1 above shows incomplete glycosylation
patterns that are the typical result of current recombinant glycoprotein
mammalian expression systems. Our GlycoAdvance technology completes the
biologically critical glycosylation patterns on recombinant glycoproteins.
Figure 2 shows the same protein molecule remodeled with GlycoAdvance. A
glycoprotein with full complement of terminal sialic acids may have a
significantly longer plasma half-life than glycoproteins lacking these terminal
sugars.

     A good example of the importance of glycosylation can be seen by comparing
two similar interferon drugs: Betaseron(TM) and AVONEX(TM). Betaseron is
expressed in E. coli, AVONEX in Chinese hamster ovary cells. Because bacteria do
not add sugars to proteins, Betaseron is not glycosylated. On the other hand,
AVONEX is manufactured using a mammalian expression system, which can produce
varying levels of glycosylated proteins. Published research shows AVONEX is ten
times more potent per milligram than Betaseron, a difference directly related to
the carbohydrate molecules attached to the AVONEX drug. This results in a
recommended dosage for AVONEX of 30 micrograms, once per week, intramuscularly,
compared with 250 micrograms, every other day, subcutaneously for Betaseron. In
1999, the worldwide market share for AVONEX was approximately 60% of total
interferon sales, which were estimated to be $1.0 billion.

     We are using GlycoAdvance to modify glycoproteins for a number of major
biopharmaceutical companies on an evaluative basis. In collaboration with these
biopharmaceutical companies, we have shown that GlycoAdvance technology can
increase the efficiencies and in vivo half-lives of recombinant glycoproteins
produced in mammalian expression systems. We are actively seeking to establish
longer-term collaborative relationships for use of GlycoAdvance in drug
development and manufacture.


                                       14




NUTRACEUTICALS AND CONSUMER PRODUCT APPLICATIONS

Joint Venture with McNeil

     In late 1999, we entered into a joint venture with McNeil for the
large-scale enzymatic production of FOS and other complex carbohydrates. The
construction of the joint venture's initial commercial manufacturing plant in
Athens, Georgia will be completed in early 2000. Validation procedures for the
new plant are currently underway. We expect the joint venture to begin
production of its initial commercial products during 2000.

     The joint venture is focused on the development and marketing of FOS and
other related compounds for a number of large commercial applications,
including:

     o Novel bulking agents for sucralose, McNeil's recently approved no-calorie
       sweetener;
     o Nutraceutical food ingredients or dietary supplements that foster the
       growth of desirable bacteria in the human gastrointestinal tract;
     o Low-cost, high-quality ingredients for use in foods such as cereals and
       ice creams;
     o Antibiotic replacements in animal and poultry feeds; and
     o Oral health products.

     Sucralose Bulking Agent.  McNeil's primary impetus for the initial research
collaboration with us was the need for a high-quality, healthful,
attractively-priced soluble fiber to be used in products with McNeil's recently
approved no-calorie sweetener, sucralose. McNeil is developing consumer products
combining the joint venture's bulking agent with sucralose. These products are
expected to have the mass, look, feel, texture, and cooking properties of table
sugar. The joint venture is also developing bulking agents for use in industrial
food applications in combination with McNeil's sucralose.

     Nutraceutical Food Ingredients.  The joint venture plans to sell FOS
products to food and nutritional companies for nutraceutical applications. FOS
is useful as a soluble dietary fiber, and promotes the growth of helpful
bacteria called bifidobacteria. Although these products have become popular in
various international markets, especially Japan, significant markets have not
yet been established in the United States.

     Food Ingredients, Animal Feed, and Oral Health Products.  Other
applications under consideration include development of FOS and other compounds
to replace polydextrose, which is currently used as the bulking agent in a wide
variety of low fat and reduced-calorie food products like diet ice creams, gums,
dressings, spreads, jams, and peanut butter. Although polydextrose is
inexpensive and widely used in food products, it is not favored as a food
ingredient because of the taste, color, and adverse side effects that result
from its use. We also believe that use of FOS compounds in animal and poultry
feeds may have significant health benefits, eventually allowing the replacement
of current antibiotic supplements routinely added in poultry and animal feeds.
The joint venture is also funding research being conducted at the University of
Pennsylvania Dental School on the potential use of other compounds as oral
health products. Opportunities in these areas are still at early stages of
exploration.

     The joint venture is owned equally by Neose and McNeil. Neose and McNeil
each contributed intellectual property to the joint venture. In addition, McNeil
contributed to the joint venture the initial commercial manufacturing facility,
for which 50% of the cost will be reimbursed by the joint venture.

     If the joint venture builds additional production facilities, and we wish
to maintain our 50% ownership in the joint venture, we are required to
contribute half of the expenditures, up to a maximum contribution of $8.85
million. However, we may elect to contribute as little as $1.85 million of the
cost of the facilities, so long as our aggregate capital contributions are at
least 15% of the joint venture's aggregate capital contributions. In this case,
McNeil will fund the remainder of our half of the joint venture's capital
expenditures, and our ownership percentage will be proportionately reduced. We
have an option, expiring in September 2006, to return to 50% ownership in the
joint venture by reimbursing McNeil for these amounts. In addition, until the
joint venture is profitable, McNeil is required to fund, as a non-recourse,
no-interest loan, all of the joint venture's aggregate capital expenditures in
excess of an agreed upon amount, and all of the joint venture's operating
losses. These loans would be repayable by the joint


                                       15




venture to McNeil over seven years, and in the event of any dissolution of the
joint venture would be payable to McNeil before any distribution of assets to
us. McNeil has the exclusive right to purchase the joint venture's bulking agent
for use in specified consumer product applications at a constant mark-up over
the joint venture's cost.

     We will account for our investment in the joint venture under the equity
method, under which we will recognize our share of earnings and losses of the
joint venture. We will record our share of the losses of the joint venture,
however, only to the extent of our actual or committed investment in the joint
venture.

Infant Formula Additive

     During 1999, we entered into an agreement with Wyeth to develop a
manufacturing process for bioactive carbohydrate to be used as an ingredient in
Wyeth's infant and pediatric nutritional formula products. We will develop a
large-scale manufacturing process for this ingredient, and Wyeth plans the
introduction of this proprietary ingredient into its infant formula lines. We
will receive contract development payments and milestone payments, and will sell
product to Wyeth upon commercialization. Wyeth is a leading global infant
formula manufacturer with products distributed in more than 90 countries.

OTHER PROGRAMS

     Carbohydrates are involved in many critical biological functions and may be
broadly useful as pharmaceutical compounds. We are seeding and cultivating a
number of early stage research projects on promising, carbohydrate-based
therapeutic approaches. We do not intend to proceed beyond early stage clinical
trials on any pharmaceutical product without a suitable partner for late stage
development and commercialization.

     Abbott Laboratories has a non-exclusive license to use our technology to
manufacture and commercialize, for nutritional purposes only, any complex
carbohydrate naturally found in human breast milk. If Abbott commercializes any
products manufactured using our technology, we will receive fees from Abbott
tied to commercial quantities.

PATENTS AND PROPRIETARY RIGHTS

     We solely own 18 issued U.S. patents, we co-own 2 issued U.S. patents, and
have licensed 45 issued U.S. patents from 8 institutions. In addition, we own
or have licensed over 40 patent applications pending in the United States. There
are a number of U.S. and foreign patent applications related to our owned and
licensed patents. We have licensed, or have an option to license, patents and
patent applications from the following institutions: University of California,
The Scripps Research Institute, University of Pennsylvania, Japan Tobacco, Inc.,
University of Michigan, Marukin Shoyu Co., Ltd., Celltech Therapeutics Limited,
University of Arkansas, University of British Columbia, Rockefeller University,
University of Alberta, Genencor International, National Research Council Canada,
Harvard University, and University of Washington.

GOVERNMENT REGULATION

     Products manufactured using our technology, and our manufacturing and
research activities, will be subject to varying degrees of regulation by a
number of government authorities in the United States and other countries. The
development, manufacture, marketing, and sale of products manufactured using our
technology will be subject to one of the following regulatory review processes:

     o pharmaceutical--new drug application or biologic license application;
     o infant formula additive--new infant formula submission; or
     o foods and food ingredients--either self-affirmed to be or notified as
       GRAS or food additive petition process.

     Generally, pharmaceuticals are regulated more rigorously than foods and
food ingredients. Infant formula additives are special types of food ingredients
that are regulated more rigorously than most other types of food ingredients.


                                       16




     Our operations are also subject to regulation under the Occupational Safety
and Health Act, the Environmental Protection Act, the Toxic Substances Control
Act, the Resource Conservation and Recovery Act, and other similar federal,
state, and local laws, rules, and regulations governing laboratory activities,
waste disposal, handling dangerous materials, and other matters. We voluntarily
comply with the National Institutes of Health Guidelines for Research Involving
Recombinant DNA Technologies.

Regulation of Pharmaceutical Product Candidates

     We are developing proprietary processes for the manufacture of complex
carbohydrates for two cancer vaccines being developed by Bristol-Myers. Our
research and development activities regarding, and the future manufacturing and
marketing of, our pharmaceutical product candidates, as well as the Bristol-
Myers vaccines, are and will be subject to significant regulation by numerous
governmental authorities in the United States and other countries.
Pharmaceutical products intended for therapeutic use in humans are governed
principally by the federal Food, Drug and Cosmetic Act, Public Health Service
Act, and FDA regulations in the United States, and by comparable laws and
regulations in foreign countries. The federal Food, Drug and Cosmetic Act and
other federal statutes and regulations govern the testing, manufacture, safety,
effectiveness, labeling, storage, record keeping, approval, advertising, and
promotion of pharmaceutical products. The process of completing pre-clinical and
clinical testing and obtaining FDA approval for a new pharmaceutical product
requires a number of years and the expenditure of substantial resources.

     Following drug discovery, the steps required before a new pharmaceutical
product may be marketed in the United States include:

     o preclinical laboratory and animal tests;
     o the submission to the FDA of an Investigational New Drug application;
     o human clinical and other studies to assess safety and parameters of use;
     o adequate and well-controlled clinical trials, typically conducted in
       three phases, to establish the safety and effectiveness of the drug;
     o the submission of a New Drug Application or Biologic License Application
       to the FDA;
     o and FDA approval of the New Drug Application or Biologic License
       Application prior to any promotion, commercial sale, or shipment of the
       drug.

     Clinical trials are typically conducted in three sequential phases, which
may overlap. Phase I clinical trials are designed to determine the metabolic and
pharmacologic effects of the drug in humans, the side effects associated with
increasing doses, and, possibly, to obtain early indications of efficacy. These
studies generally involve a small number of healthy volunteer subjects, but may
be conducted on people with the disease the drug is intended to treat. Phase II
studies are conducted to evaluate the effectiveness of the drug for a particular
indication and thus involve patients with the disease under study. These studies
also provide evidence of the short-term side effects and risks associated with
the drug. Phase III studies are generally designed to provide the substantial
evidence of safety and effectiveness of a drug required to obtain FDA approval.
They often involve a substantial number of patients in multiple study centers
and may include chronic administration of the drug in order to assess the
overall benefit-risk relationship of the drug. A clinical trial may combine the
elements of more than one phase, and typically two or more Phase III studies may
be required. Typical estimates of the total time required for completing such
clinical testing vary between four and ten years. For marketing outside the
United States, foreign regulatory requirements govern human clinical trials and
marketing approval for drugs. The requirements relating to the conduct of
clinical trials, product licensing, pricing, and reimbursement vary widely from
country to country.

Third Party Reimbursement

     Our ability and our collaborator's ability to commercialize successfully
drug products may depend in part on the extent to which coverage and
reimbursement for the cost of such products will be available from government
health administration authorities, private health insurers, and other
organizations. Significant uncertainty exists as to the reimbursement status of
new therapeutic products and we cannot be


                                       17




sure that third-party reimbursement would be available for therapeutic products
we or our collaborators might develop. Health care reform especially as it
relates to prescription drugs is an area of increasing national attention and a
priority of many governmental officials. Certain reform proposals, if adopted,
could impose limitations on the prices we will be able to charge in the United
States for our products or the amount of reimbursement available for our
products or the amount of reimbursement available for our products from
governmental agencies or third-party payors.

Regulation of Infant Formula Additives

     We are collaborating with Wyeth to develop a complex carbohydrate as a
potential nutritional additive to infant formula. The manufacture, composition,
and labeling of infant formulas are subject to the provisions of the United
States Infant Formula Act. Prior to commercializing any potential infant formula
additive, an infant formula manufacturer must demonstrate that its potential
additive:

     o is GRAS either by previous regulation of the FDA, or is self-affirmed as
       GRAS by the infant formula manufacturer; or
     o is the subject of an approved food additive petition.

     Under the United States Infant Formula Act, infant formula manufacturers
are required to notify the FDA of any intent to revise, add, or substitute any
protein, fat, or carbohydrate in infant formula ninety days prior to the
intended date of commercial distribution. This new infant formula submission
must contain the quantitative formulation of the new infant formula, a
description of any reformulation or change in processing, and assurances that
the new infant formula will not be marketed without complying with the nutrient
and quality factor requirements and cGMP control requirements. Upon
notification, the FDA has a ninety-day period, in which to request additional
information, or deny marketing rights for the new formula. If no response is
received from the FDA within the ninety-day period, the manufacturer may proceed
with commercial sales of the newly formulated product. Under our agreement,
Wyeth is responsible for all regulatory activities relating to the infant
formula additive. Wyeth has not yet made, and may never make, any filings with
the FDA to propose inclusion of an infant formula additive manufactured using
our technology. Their efforts to commercialize any infant formula additive may
be materially and adversely affected if they do not self-affirm GRAS status of
this potential infant formula additive.

     Wyeth may market infant formula containing this additive in foreign
countries. Infant formula regulatory requirements vary widely from country to
country, and may be more or less stringent than FDA requirements. The time
required to obtain clearances, if required, in foreign countries may be longer
or shorter than that required in the United States.

Regulation of Foods and Food Ingredients

     The initial product to be manufactured by our McNeil joint venture will be
regulated as a food ingredient. Foods and food ingredients are subject to the
provisions of the federal Food, Drug and Cosmetic Act. Food ingredients are
broadly defined as any substances that may become a component, or otherwise
affect the characteristics, of food. Food ingredients are regulated either as
substances GRAS or as food additives.

     Food ingredients that are GRAS are excluded from the definition of food
additives. The FDA has affirmed by regulation a number of substances as GRAS,
although it is not required that a substance be affirmed as GRAS by regulation
of the FDA in order to be GRAS. Alternatively, under a new proposed regulatory
framework, a manufacturer may submit GRAS notification to the FDA claiming that
a food ingredient is GRAS. The FDA generally will respond to the notification
within approximately ninety days as to whether there is sufficient evidence to
support the notifier's conclusion that the substance is GRAS. A positive
response from the FDA indicates that it has no objection to the notifier's
conclusion that a substance is a GRAS. A manufacturer also may self-affirm a
substance as GRAS by making an independent determination that qualified experts
would generally agree that the substance is GRAS for a particular use. If the
FDA disagrees with the manufacturer's self determination or GRAS notification,
the manufacturer generally must submit a food additive petition to obtain
approval to market the food ingredient. If the FDA disagrees with a
determination, the manufacturer must complete the food additive petition process


                                       18




for the substance to be approved by the FDA. Affirmation of GRAS status either
by the manufacturer or regulation of the FDA would allow the manufacturer to
market and sell the additive or the food containing the additive. Furthermore, a
manufacturer's decision to rely on an independent determination may limit the
marketability of that manufacturer's products to food manufacturers, many of
whom require confirmation of GRAS status from the FDA before they will purchase
substances for use in foods from third parties.

     Food ingredients that are not GRAS are regulated as food additives. All new
food additives require FDA approval prior to commercialization. Information
supporting the safety of a food additive is submitted to the FDA in the form of
a food additive petition. The food additive petition process is generally
expensive and lengthy. Commercialization of the food additive, if permitted by
the FDA, often occurs several years after the petition is submitted to the FDA.
The petition must establish with reasonable certainty that the food additive is
safe for its intended use at the level specified in the petition. The petition
is required to contain reports of safety investigations of the food additive and
details regarding its physical, chemical, and biological properties. Product
safety studies submitted to the FDA are typically conducted in accordance with
FDA good laboratory practices requirements. If a food additive petition is
submitted, the FDA may choose to reject the petition or deny any desired
labeling claims. Furthermore, the FDA may require the establishment of
regulations that necessitate costly and time-consuming compliance procedures.

COMPETITION

     Some companies are producing by enzymatic and other means a limited variety
of complex carbohydrates. Although we do not believe any of these companies has
the ability currently to manufacture a wide variety of human carbohydrate
products in quantities sufficient for commercialization, any of these companies
may develop technologies superior to our technologies. In addition, some
companies are investigating novel methods of chemical synthesis, sometimes with
enzymatic steps, to produce commercial quantities of complex carbohydrates.
These and other efforts by potential competitors may be successful or other
methods of carbohydrate synthesis which compete with our technologies, may be
developed.

     Our joint venture's products may face significant competition. FOS products
that may be produced by the joint venture for nutraceutical applications will
face competition from existing FOS products. Principal competitors in this area
include a Japanese company, Meiji Seika Kaisha, which sells FOS products under
the brand name, Meioligo(TM), a European joint venture, Beghin-Meiji Industries,
which sells its FOS products under the brand name Actilight(TM), and a European
company, Orafti, which sells its FOS products under the brand names
Raftiline(TM) and Raftilose(TM). Another planned joint venture product will be
added to McNeil's sucralose sweetener as a bulking agent. These products will in
turn compete with other natural and artificial sweeteners. The joint venture
will also sell this bulking agent directly to other users for use in such items
as cake mixes, low-fat cookies, or ice cream. There is significant competition
from other bulking agents in this market as well, and thus the ability to
produce the bulking agent at an attractive price and to offer other product
features will be important.

     Our glycoprotein remodeling technology will compete with several
alternative technologies that seek to improve therapeutic glycoproteins as
drugs. A number of companies are developing technologies that will compete with
our glycoprotein remodeling technology, to increase the dosing level achievable
without side effects and the half-life of these proteins in humans, thus
reducing the frequency of required injections. These competitive technologies
include microsphere encapsulation, polyethelyne glycol modification, and human
albumin fusion.

MANUFACTURING

     We intend to manufacture complex carbohydrates. To commercialize our
products, we must manufacture our products in commercial quantities under cGMP
prescribed by the FDA, at acceptable costs.

     We believe we have the capacity to produce, in our existing facility,
adequate quantities of the active pharmaceutical ingredients required by
Bristol-Myers for its GMK and MGV cancer vaccines for clinical


                                       19




trials and commercial launch. We believe we have the capacity to develop
scalable manufacturing processes required for our collaboration with Wyeth in
our existing facilities, although we currently estimate that we will require
additional facilities to produce these ingredients at commercial scale. We will
need to develop commercial-scale manufacturing facilities meeting cGMP, or
depend on our collaborators, licensees, or contract manufacturers for the
commercial manufacture of our potential products.

     The joint venture's initial commercial manufacturing plant is scheduled to
be completed in early 2000. The initial plant is located in Athens, Georgia. In
order to expand manufacturing capacity for the joint venture, the joint venture
would need to construct additional facilities. We have the capacity, in our
current facility in Horsham, Pennsylvania, to manufacture the quantities of
enzyme required to supply the initial commercial manufacturing facility in
Georgia.

MARKETING, DISTRIBUTION, AND SALES

     We have no experience or capability in marketing, distributing, or selling
products. If we commercialize any products, we will have to develop a sales
force or rely on our collaborators, licensees, or arrangements with others to
provide marketing, distribution, and sales support for these products.

EMPLOYEES

     As of December 31, 1999, we employed 68 individuals, consisting of 51
employees engaged in research and development activities and 17 employees
devoted to business development, finance, and administrative activities. Our
staff includes carbohydrate biochemists as well as scientists with expertise in
organic chemistry, analytic chemistry, molecular biology, microbiology, cell
biology, scale-up manufacture, and regulatory affairs. A significant number of
our employees have prior experience with pharmaceutical or biotechnology
companies, and in the food industry, and many have specialized training in
carbohydrate technology. None of our employees is covered by collective
bargaining agreements. We believe we have good relations with our employees.

ITEM 2.  PROPERTIES.

     We own approximately 45,000 square feet of laboratory and office space in
Horsham, Pennsylvania. In addition, we lease approximately 2,600 square feet of
laboratory and office space in San Diego, California. The lease expires in
September 2001.

     We must develop commercial-scale manufacturing facilities meeting current
good manufacturing practices, or depend on our collaborators, licensees, or
contract manufacturers for the commercial manufacture of some of our potential
products. See "Item 1--Business--Manufacturing."

ITEM 3.  LEGAL PROCEEDINGS.

     We are not a party to any material legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     We did not submit any matters to a vote of security holders during the
fourth quarter of 1999.


                                       20




                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock is listed on the Nasdaq National Market under the symbol
NTEC. We commenced trading on the Nasdaq National Market on February 15, 1996.
The following table sets forth the high and low closing sale prices of our
common stock for the periods indicated.

                                                            COMMON STOCK PRICE
                                                            -------------------
                                                             HIGH         LOW
                                                            ------       ------
YEAR ENDED DECEMBER 31, 1998
  First Quarter...........................................  $15.88       $12.13
  Second Quarter..........................................   17.88        13.94
  Third Quarter...........................................   16.25         8.75
  Fourth Quarter..........................................   15.38         8.00
YEAR ENDED DECEMBER 31, 1999
  First Quarter...........................................   16.75        11.38
  Second Quarter..........................................   13.69         9.75
  Third Quarter...........................................   15.00         9.50
  Fourth Quarter..........................................   16.75        12.69
YEAR ENDED DECEMBER 31, 2000
  First Quarter (through February 22, 2000)...............   28.00        13.75

     As of February 22, 2000 there were approximately 270 record holders and
2,900 beneficial holders of our common stock. We have never declared or paid any
cash dividends on our common stock. We currently intend to retain any future
earnings to fund the development and growth of our business. Therefore, we do
not anticipate paying any cash dividends in the foreseeable future. Any future
determination to pay dividends will be at the discretion of our board of
directors.


                                       21




ITEM 6.  SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA.

     The following Statements of Operations Data for the years ended December
31, 1995, 1996, 1997, 1998, and 1999, and for the period from inception (January
17, 1989) through December 31, 1999, are derived from our consolidated financial
statements that have been audited by Arthur Andersen LLP, independent public
accountants. The financial data set forth below should be read in conjunction
with the sections of this Form 10-K entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the financial
statements and notes included elsewhere in this Form 10-K.



                                                                                                       PERIOD FROM
                                                                                                        INCEPTION
                                                                                                       (JANUARY 17,
                                                                                                         1989) TO
                                                             YEAR ENDED DECEMBER 31,                   DECEMBER 31,
                                              ------------------------------------------------------   ------------
                                                1995       1996       1997       1998        1999          1999
                                              --------   --------   --------   ---------   ---------   ------------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                     
STATEMENTS OF OPERATIONS DATA:
Revenue from collaborative agreements.......  $  1,199   $  1,383   $    725   $     390   $     422     $  6,767
                                              --------   --------   --------   ---------   ---------     --------
Operating Expenses:
  Research and development..................     4,733      6,502      8,013       9,912      10,649       51,553
  General and administrative................     1,665      2,505      3,884       3,635       4,520       21,233
                                              --------   --------   --------   ---------   ---------     --------
  Total expenses............................     6,398      9,007     11,897      13,547      15,169       72,786
Interest income (expense), net..............       132      1,483      2,108       1,250       1,429        6,207
                                              --------   --------   --------   ---------   ---------     --------
Net loss....................................  $ (5,067)  $ (6,141)  $ (9,064)  $ (11,907)  $ (13,318)    $(59,812)
                                              ========   ========   ========   =========   =========     ========
Basic and diluted net loss per share........  $  (1.99)  $  (0.82)  $  (0.96)  $   (1.25)  $   (1.25)
Basic and diluted weighted-average shares
  outstanding...............................     2,550      7,494      9,405       9,556      10,678





                                                                AS OF DECEMBER 31,
                                              ------------------------------------------------------
                                                1995       1996       1997       1998        1999
                                              --------   --------   --------   ---------   ---------
                                                                 (IN THOUSANDS)
                                                                            
BALANCE SHEET DATA:
Cash and marketable securities..............  $ 11,189   $ 32,845   $ 43,303   $  32,023   $  33,235
Total assets................................    14,639     37,118     58,886      46,265      52,239
Long-term debt..............................     1,235        556      8,917       8,300       7,300
Deficit accumulated during development
  stage.....................................   (19,382)   (25,523)   (34,587)    (46,494)    (59,812)
Total stockholders' equity..................    11,733     35,120     46,954      36,013      40,785



                                       22




ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

     The following discussion should be read in conjunction with our financial
statements and related notes included in this Form 10-K.

OVERVIEW

     We are a leading developer of proprietary technologies for the synthesis
and manufacture of complex carbohydrates. Our proprietary enzymatic technology
platform enables the rapid and cost-effective synthesis of a wide range of
complex carbohydrates in commercial quantities. We use our broad, enabling
technology to produce complex carbohydrates for pharmaceutical, biotechnology,
nutritional, and consumer product applications. Due to their structural
complexity, complex carbohydrates have been difficult and expensive to produce,
and their commercial development has been significantly limited.

     We have incurred operating losses each year. As of December 31, 1999, we
had an accumulated deficit of approximately $60 million. We expect additional
losses for some time as we expand research and development efforts, expand
manufacturing scale-up activities, and begin sales and marketing activities.

RESULTS OF OPERATIONS

Years Ended December 31, 1999 and 1998

     Revenues from collaborative agreements increased to $422,000 in 1999 from
$390,000 in 1998. Substantially all of our revenues during 1999 were payments
received by us under our collaborative agreements with Bristol-Myers and Wyeth.
Substantially all of our revenues during 1998 were payments received by us under
our collaborative agreement with Bristol-Myers.

     Research and development expenses increased to $10.6 million in 1999 from
$9.9 million in 1998. The increase was primarily attributable to increased
funding of outside research, and the amortization of acquired technology from
Cytel Corporation.

     General and administrative expenses increased to $4.5 million in 1999 from
$3.6 million in 1998. The increase was primarily attributable to increased
patent and general legal expenses associated with the intellectual property
acquired from Cytel Corporation, and increased business development expense.

     Interest income increased to $1.9 million in 1999 from $1.8 million in 1998
due to higher average cash and marketable securities balances during 1999.
Interest expense decreased to $433,000 in 1999 from $534,000 in 1998 due to
lower average loan balances outstanding during 1999.

Years Ended December 31, 1998 and 1997

     Revenues from collaborative agreements decreased to $390,000 in 1998 from
$725,000 in 1997. Substantially all of our revenues during 1998 were payments
received by us under our collaborative agreement with Bristol-Myers.
Substantially all of our revenues during 1997 were payments received by us under
our collaborative agreement with Abbott.

     Research and development expenses increased to $9.9 million in 1998 from
$8.0 million in 1997. The increase was primarily attributable to hiring
additional scientific personnel and increased purchases of laboratory supplies
and services related to our collaborative agreement with McNeil, and increased
funding of external research.

     General and administrative expenses decreased to $3.6 million in 1998 from
$3.9 million in 1997. The decrease was primarily attributable to decreased
patent and business development expenses compared to the prior year, which
included expenses related to entering into our collaboration with McNeil.

     Interest income decreased to $1.8 million in 1998 from $2.7 million in 1997
due to lower average cash balances during 1998. Interest expense decreased to
$534,000 in 1998 from $555,000 in 1997 due to lower average loan balances
outstanding during 1998.


                                       23




LIQUIDITY AND CAPITAL RESOURCES

     We have incurred operating losses each year since our inception. As of
December 31, 1999, we had an accumulated deficit of approximately $60 million.
We have financed our operations through private and public offerings of our
securities, and revenues from our collaborative agreements. We had $33.2 million
in cash and marketable securities as of December 31, 1999, compared to $32.0
million in cash and marketable securities as of December 31, 1998. This increase
was primarily attributable to our completion of two private placements of common
stock totaling $17.4 million. The increase was partly offset by the use of funds
for the acquisition of intellectual property from Cytel Corporation and for our
continuing operating activities.

     Under the terms of our joint venture with McNeil, we may be required to
make additional capital contributions to fund capital expenditures. If the joint
venture builds additional production facilities, and we wish to maintain our 50%
ownership in the joint venture, we are required to contribute half of such
expenditures, up to a maximum contribution of $8.85 million. However, we may
elect to contribute as little as $1.85 million of the cost of the facilities, so
long as our aggregate capital contributions are at least 15% of the joint
venture's aggregate capital contributions. In this case, McNeil will fund the
remainder of our half of the joint venture's capital expenditures, and our
ownership percentage will be proportionately reduced. We have an option,
expiring in September 2006, to return to 50% ownership in the joint venture by
reimbursing McNeil for this amount. In addition, until the joint venture is
profitable, McNeil is required to fund, as a non-recourse, no-interest loan, all
of the joint venture's aggregate capital expenditures in excess of an agreed
upon amount, and all of the joint venture's operating losses. These loans would
be repayable by the joint venture to McNeil over seven years, and in the event
of any dissolution of the joint venture would be payable to McNeil before any
distribution of assets to us.

     We will account for our investment in the joint venture under the equity
method, under which we will recognize our share of earnings and losses of the
joint venture. We will record our share of the losses of the joint venture,
however, only to the extent of our actual or committed investment in the joint
venture. In 1999, we recorded a loss from operations of the joint venture of
$345,000, which is included in research and development expense.

     On March 26, 1999, we acquired the carbohydrate manufacturing patents,
licenses, and other intellectual property of Cytel Corporation. We paid $3.5
million in cash to Cytel and an additional $1.5 million in cash into escrow, the
release of which is conditioned on Cytel's satisfaction, prior to September 26,
2000, of certain matters relating to the acquired patents and licenses. We have
recorded the $1.5 million placed into escrow as Restricted Cash on our
Consolidated Balance Sheet. Any cash remaining in the escrow account on
September 26, 2000 will be returned to us and will be available for general
corporate purposes.

     Because the acquired intellectual property consists of core technology with
alternative future uses, we have capitalized $3.3 million of the amount paid to
Cytel as Acquired Technology. The remaining $200,000 was charged to expenses in
our Consolidated Statement of Operations in 1998.

     In addition, we agreed to pay Cytel up to an additional $1.6 million in
cash, contingent on potential payments and revenues realized by us from certain
future corporate collaborations, so long as we enter into any such collaboration
by March 26, 2000. We are obligated to pay $250,000 of the $1.6 million as a
result of entering into a collaboration with Wyeth. The Acquired Technology
balance will be amortized to our Consolidated Statement of Operations over eight
years, which we estimate to be the useful life of the technology. During the
year ended December 31, 1999, we recorded amortization expense of $315,000
relating to the acquired technology.

     In 1997, we issued, through the Montgomery County (Pennsylvania) Industrial
Development Authority, $9.4 million of taxable and tax-exempt bonds. The bonds
were issued to finance the purchase of our previously leased building and the
construction of a pilot-scale manufacturing facility within our building. The
bonds are supported by an AA-rated letter of credit, and a reimbursement
agreement between our bank and the letter of credit issuer. The interest rate on
the bonds will vary weekly, depending on market rates for AA-rated taxable and
tax-exempt obligations, respectively. During 1999, the


                                       24




weighted-average, effective interest rate was 6.5% per annum, including
letter-of-credit and other fees. To provide credit support for this arrangement,
we have given a first mortgage on the land, building, improvements, and certain
machinery and equipment to our bank. In addition, we have agreed to maintain at
least $20 million of cash and short-term investments. If we fail to comply with
this covenant, we are required to deposit with the lender cash collateral up to,
but not more than, the loan's unpaid balance, which was $8.3 million as of
December 31, 1999.

     During 1997, 1998, and 1999, we purchased approximately $10.8 million, $0.8
million, and $1.2 million of property, equipment, and building improvements.

     We expect that our existing cash and short-term investments will be
adequate to fund our operations through at least 2001, although changes in our
collaborative relationships or our business, whether or not initiated by us, may
cause us to deplete our cash and short-term investments sooner than the above
estimate. The timing and amount of our future capital requirements and the
adequacy of available funds will depend on many factors, including if or when
any products manufactured using our technology are commercialized.

RECENT ACCOUNTING PRONOUNCEMENT

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be applied, and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We are evaluating SAB 101 and the effect it may have on our
financial statements. At this time, we believe that SAB 101 will not have a
material impact on our financial position or results of operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     We do not hold any investments in market risk sensitive instruments.
Accordingly, we believe that we are not subject to any material risks arising
from changes in interest rates, foreign currency exchange rates, commodity
prices, equity prices or other market changes that affect market risk sensitive
instruments.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Financial Statements required by this item are attached to this Form
10-K beginning on page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES.

     None.


                                       25




                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

     The information required by this item is incorporated herein by reference
to our Proxy Statement for our 2000 Annual Meeting of Stockholders.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information required by this item is incorporated herein by reference
to our Proxy Statement for our 2000 Annual Meeting of Stockholders.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required by this item is incorporated herein by reference
to our Proxy Statement for our 2000 Annual Meeting of Stockholders.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this item is incorporated herein by reference
to our Proxy Statement for our 2000 Annual Meeting of Stockholders.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

     (a) 1. Financial Statements.

     Our Consolidated Financial Statements listed in the accompanying Index to
Consolidated Financial Statements at page F-1 are filed as part of this Form
10-K.

         2. Financial Statement Schedules.

     All financial statement schedules have been omitted because they are not
applicable, not required, or the information is shown in the Consolidated
Financial Statements or Notes thereto.

         3. Exhibits. (See (c) below)

     (b) Reports on Form 8-K.

     On February 2, 2000, we filed a Current Report on Form 8-K with the SEC. We
filed under "Item 5" of the Form 8-K our agreements with Bristol-Myers Squibb
Company, McNeil PPC, Inc., acting through its division McNeil Specialty Products
Company, and American Home Products Corporation, acting through its subsidiary
company, Wyeth-Ayerst International Inc. We also submitted an application for
confidential treatment for specific portions of each of the filed agreements.

     (c) Exhibits.

     The following is a list of exhibits filed as part of this Form 10-K. We are
incorporating by reference to our previous SEC filings each exhibit that
contains a footnote. For exhibits incorporated by reference, the location of the
exhibit in the previous filing is indicated in parentheses.

EXHIBIT
NUMBER     DESCRIPTION
- -------    -----------
 3.1       Second Amended and Restated Certificate of Incorporation.
           (Exhibit 3.1)(1)

 3.2       Amended and Restated By-Laws. (Exhibit 3.3)(5)

 3.3       Certificate of Designation establishing and designating the Series A
           Junior Participating Preferred Stock. (Exhibit 3.2)(5)

 4.1       See Exhibits 3.1, 3.2, and 3.3 for instruments defining rights of
           holders of common stock.


                                       26




 4.2       Representation pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
           (Exhibit 4.1)(3)

 4.3       Trust Indenture, dated as of March 1, 1997, between Montgomery County
           Industrial Development Authority and Dauphin Deposit Bank and Trust
           Company. (Exhibit 4.2)(3)

 4.4       Form of Montgomery County Industrial Development Authority Federally
           Taxable Variable Rate Demand Revenue Bond (Neose Technologies, Inc.
           Project) Series B of 1997. (Exhibit 4.3)(3)

 4.5       Amended and Restated Rights Agreement, dated as of December 3, 1998,
           between American Stock Transfer & Trust Company, as Rights Agent, and
           Neose. (Exhibit 4.1)(6)

10.1       Stock Purchase Agreement, dated as of August 28, 1990, between
           University of Pennsylvania and Neose. (Exhibit 10.1)(1)

10.2       License Agreement, dated as of August 28, 1990, between University of
           Pennsylvania and Neose, as amended to date. (Exhibit 10.2)(1)

10.3(a)+   Series D Preferred Stock Purchase Agreement, dated as of December 30,
           1992, between Abbott Laboratories and Neose. (Exhibit 10.8(a))(1)

10.3(b)+   Supply Agreement, dated as of December 30, 1992, between Abbott
           Laboratories and Neose. (Exhibit 10.8(b))(1)

10.3(c)+   Research and License Agreement, dated as of December 30, 1992,
           between Abbott Laboratories and Neose. (Exhibit 10.8(c))(1)

10.3(d)+   Amendment to the Research and License Agreement, dated as of January
           18, 1995, between Abbott Laboratories and Neose. (Exhibit 10.8(d))(2)

10.4       Form of Series E Preferred Stock Investors' Rights Agreement.
           (Exhibit 10.9)(1)

10.5       Form of Series F Preferred Stock Investors' Rights Agreement.
           (Exhibit 10.10)(1)

10.6       Form of Warrant to Purchase Common Stock, dated as of February 23,
           1991. (Exhibit 10.11)(1)

10.7       Form of Warrant to Purchase Common Stock, dated as of June 30, 1993.
           (Exhibit 10.12)(1)

10.8       Form of Warrant to Purchase Common Stock, dated as of February 16,
           1994. (Exhibit 10.13)(1)

10.9       Form of Warrant to Purchase Series E Preferred Stock, dated as of
           July 29, 1994. (Exhibit 10.14)(1)

10.10      Warrant for the Purchase of Common Stock, dated as of June 30, 1995,
           between Financing for Science International, Inc. and Neose.
           (Exhibit 10.15)(1)

10.11++    1995 Stock Option/Stock Issuance Plan, as amended. (Exhibit 99.1)(4)

10.12++    Employee Stock Purchase Plan. (Exhibit 10.17)(1)

10.13++    Employment Agreement dated April 1, 1992, between David A. Zopf and
           Neose, as amended to date. (Exhibit 10.18)(1)

10.14      Design-Build Agreement dated August 30, 1996, between Irwin &
           Leighton, Inc. and Neose. (Exhibit 10.19)(2)

10.15      Agreement for Purchase and Sale of Real Property, dated March 14,
           1997, by and between Pennsylvania Business Campus Delaware, Inc. and
           Neose. (Exhibit 2.1)(3)

10.16      Loan Agreement, dated as of March 1, 1997, between Montgomery County
           Industrial Development Authority and Neose. (Exhibit 10.1)(3)

10.17      Participation and Reimbursement Agreement, dated as of March 1, 1997,
           between Jefferson Bank and CoreStates Bank, N.A. (Exhibit 10.2)(3)

10.18      Form of CoreStates Bank, N.A. Irrevocable Letter of Credit.
           (Exhibit 10.3)(3)

10.19      Pledge, Security and Indemnification Agreement, dated as of March 1,
           1997, by and among CoreStates Bank, N.A., Jefferson Bank, and Neose.
           (Exhibit 10.4)(3)

10.20      Reimbursement Agreement, dated as of March 1, 1997, between Jefferson
           Bank and Neose. (Exhibit 10.5)(3)

10.21      Specimen of Note from Company to Jefferson Bank. (Exhibit 10.6)(3)


                                       27


10.22      Mortgage, Assignment and Security Agreement, dated March 20, 1997,
           between Jefferson Bank and Neose. (Exhibit 10.7)(3)

10.23      Security Agreement, dated as of March 1, 1997, by and between
           Jefferson Bank and Neose. (Exhibit 10.8)(3)

10.24      Assignment of Contract, dated as of March 20, 1997, between Jefferson
           Bank and Neose. (Exhibit 10.9)(3)

10.25      Custodial and Collateral Security Agreement, dated as of March 20,
           1997, by and among Offitbank, Jefferson Bank, and Neose.
           (Exhibit 10.10)(3)

10.26      Placement Agreement, dated March 20, 1997, among Montgomery County
           Industrial Development Authority, CoreStates Capital Markets, and
           Neose. (Exhibit 10.11)(3)

10.27      Remarketing Agreement, dated as of March 1, 1997, between CoreStates
           Capital Markets and Neose. (Exhibit 10.12)(3)

10.28      Form of Purchase Agreement dated as of June 25, 1999, between Neose
           Technologies, Inc. and the purchasers set forth on the signature
           pages thereto. (Exhibit 99.1)(7)

10.29      Form of Amended and Restated Purchase Agreement dated as of June 25,
           1999, between Neose Technologies, Inc. and the purchasers set forth
           on the signature pages thereto. (Exhibit 99.2)(7)

10.30**    Research and Development Agreement, dated June 1, 1998, between Neose
           Technologies, Inc. and the Pharmaceutical Research Institute of
           Bristol-Myers Squibb Company. (Exhibit 99.1)(8)

10.31**    Operating Agreement of Magnolia Nutritionals LLC, dated October 12,
           1999, between Neose Technologies, Inc. and McNeil PPC, Inc. acting
           through its division McNeil Specialty Products Company.
           (Exhibit 99.2)(8)

10.32**    Collaboration and License Agreement, dated November 3, 1999, between
           Neose Technologies, Inc. and American Home Products Corporation.
           (Exhibit 99.3)(8)

11*        Statement re: Computation of Net Loss Per Common Share.

23.1*      Consent of Arthur Andersen LLP.

24*        Powers of Attorney (included as part of signature page hereof).

27.1*      Financial Data Schedule.

- ------------------
*    Filed herewith

**   Portions of this Exhibit were omitted and filed separately with the
     Secretary of the SEC pursuant to a request for confidential treatment that
     has been filed with the SEC.

+    Portions of this Exhibit were omitted and filed separately with the
     Secretary of the SEC pursuant to an order of the SEC granting our
     application for confidential treatment filed pursuant to Rule 406 under the
     Securities Act.

++   Compensation plans and arrangements for executives and others.

(1)  Filed as an Exhibit to our Registration Statement on Form S-1 (Registration
     No. 333-80693) filed with the SEC on December 21, 1995, as amended.

(2)  Filed as an Exhibit to our Registration Statement on Form S-1 (Registration
     No. 333-19629) filed with the SEC on January 13, 1997.

(3)  Filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarterly
     period ended March 31, 1997.

(4)  Filed as an Exhibit to our Registration Statement on Form S-8 (Registration
     No. 333-35283) filed with the SEC on September 10, 1997.

(5)  Filed as an Exhibit to our Current Report on Form 8-K filed with the SEC on
     October 1, 1997.

(6)  Filed as an Exhibit to our Current Report on Form 8-K filed with the SEC on
     January 8, 1999.

(7)  Filed as an Exhibit to our Current Report on Form 8-K filed with the SEC on
     July 14, 1999.

(8)  Filed as an Exhibit to our Current Report on Form 8-K filed with the SEC on
     February 2, 2000.
                                       28


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                              PAGE
                                                              ----
Report of Independent Public Accountants....................  F-2

Consolidated Balance Sheets.................................  F-3

Consolidated Statements of Operations.......................  F-4

Consolidated Statements of Stockholders' Equity and
  Comprehensive Loss........................................  F-5

Consolidated Statements of Cash Flows.......................  F-7

Notes to Consolidated Financial Statements..................  F-8

                                      F-1

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Neose Technologies, Inc.:

     We have audited the accompanying consolidated balance sheets of Neose
Technologies, Inc. (a Delaware corporation in the development-stage) and
subsidiaries as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity and comprehensive loss, and cash
flows for each of the three years in the period ended December 31, 1999, and for
the period from inception (January 17, 1989) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Neose Technologies, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, and for the period from inception (January 17, 1989) to
December 31, 1999, in conformity with generally accepted accounting principles.

                                          Arthur Andersen LLP

Philadelphia, Pennsylvania
January 28, 2000

                                      F-2


                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                                 DECEMBER 31,
                                                              -------------------
                                                                1998       1999
                           ASSETS                             --------   --------
                                                                   
Current assets:
  Cash and cash equivalents.................................  $  9,484   $ 10,365
  Marketable securities (Note 4)............................    22,539     22,870
  Restricted cash (Notes 6 and 8)...........................       468      2,285
  Prepaid expenses and other................................       235        118
                                                              --------   --------
     Total current assets...................................    32,726     35,638
Property and equipment, net (Note 5)........................    13,539     13,366
Acquired technology, net (Note 6)...........................        --      3,235
                                                              --------   --------
Total assets................................................  $ 46,265   $ 52,239
                                                              ========   ========

            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt (Note 8)................  $    617   $  1,000
  Accounts payable..........................................        45        237
  Accrued expenses (Note 7).................................     1,290      2,112
  Deferred revenue..........................................        --        805
                                                              --------   --------
     Total current liabilities..............................     1,952      4,154
Long-term debt (Note 8).....................................     8,300      7,300
                                                              --------   --------
     Total liabilities......................................    10,252     11,454
                                                              --------   --------
Commitments (Note 11)
Stockholders' equity (Notes 9 and 10):
  Preferred stock, $.01 par value, 5,000 shares authorized,
     none issued............................................        --         --
  Common stock, $.01 par value, 30,000 shares authorized;
     9,589 and 11,434 shares issued and outstanding.........        96        114
  Additional paid-in capital................................    82,400    101,013
  Deferred compensation.....................................      (211)      (530)
  Deficit accumulated during the development stage..........   (46,494)   (59,812)
  Unrealized gains on marketable securities.................       222         --
                                                              --------   --------
     Total stockholders' equity.............................    36,013     40,785
                                                              --------   --------
Total liabilities and stockholders' equity..................  $ 46,265   $ 52,239
                                                              ========   ========


The accompanying notes are an integral part of these financial statements.

                                      F-3


                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                                                 PERIOD FROM
                                                                                  INCEPTION
                                                                                 (JANUARY 17,
                                                   YEAR ENDED DECEMBER 31,         1989) TO
                                                ------------------------------   DECEMBER 31,
                                                  1997       1998       1999         1999
                                                --------   --------   --------   ------------
                                                                     
Revenue from collaborative agreements.........  $    725   $    390   $    422     $  6,767
Operating expenses:
  Research and development....................     8,013      9,912     10,649       51,553
  General and administrative..................     3,884      3,635      4,520       21,233
                                                --------   --------   --------     --------
     Total operating expenses.................    11,897     13,547     15,169       72,786
                                                --------   --------   --------     --------
Operating loss................................   (11,172)   (13,157)   (14,747)     (66,019)
Interest income...............................     2,663      1,784      1,862        8,855
Interest expense..............................      (555)      (534)      (433)      (2,648)
                                                --------   --------   --------     --------
Net loss......................................  $ (9,064)  $(11,907)  $(13,318)    $(59,812)
                                                ========   ========   ========     ========
Basic and diluted net loss per share..........  $  (0.96)  $  (1.25)  $  (1.25)
                                                ========   ========   ========
Basic and diluted weighted-average shares
  outstanding.................................     9,405      9,556     10,678
                                                ========   ========   ========


The accompanying notes are an integral part of these financial statements.

                                      F-4


                     NEOSE TECHNOLOGIES, INC. SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
                         EQUITY AND COMPREHENSIVE LOSS
                                 (IN THOUSANDS)



                                                                                                             DEFICIT
                                             CONVERTIBLE                                                   ACCUMULATED   UNREALIZED
                                           PREFERRED STOCK    COMMON STOCK     ADDITIONAL                  DURING THE     GAINS ON
                                           ---------------   ---------------    PAID-IN-      DEFERRED     DEVELOPMENT   MARKETABLE
                                           SHARES   AMOUNT   SHARES   AMOUNT    CAPITAL     COMPENSATION      STAGE      SECURITIES
                                           ------   ------   ------   ------   ----------   ------------   -----------   ----------
                                                                                                 
Balance, January 17, 1989 (inception)....      --    $--         --   $  --     $     --       $   --       $     --      $     --
  Initial issuance of common stock.......      --     --      1,302      13           (3)          --             --            --
  Shares issued pursuant to consulting,
    licensing, and antidilutive
    agreements...........................      --     --        329       3           (1)          --             --            --
  Sale of common stock...................      --     --        133       1            1           --             --            --
  Net loss...............................      --     --         --      --           --           --           (460)           --
                                           ------    ---     ------   -----     --------       ------       --------      --------
Balance, December 31, 1990...............      --     --      1,764      17           (3)          --           (460)           --
  Sale of stock..........................   1,517     15        420       4        4,499           (7)            --            --
  Shares issued pursuant to consulting
    and antidilutive agreements..........      --     --        145       1           --           --             --            --
  Capital contributions..................      --     --         --      --           10           --             --            --
  Dividends on preferred stock...........      --     --         --      --          (18)          --             --            --
  Net loss...............................      --     --         --      --           --           --         (1,865)           --
                                           ------    ---     ------   -----     --------       ------       --------      --------
Balance, December 31, 1991...............   1,517     15      2,329      22        4,488           (7)        (2,325)           --
  Sale of stock..........................     260      2         17      --        2,344           --             --            --
  Shares issued pursuant to redemption of
    notes payable........................      --     --        107       1          682           --             --            --
  Exercise of stock options and
    warrants.............................      --     --         21      --           51           --             --            --
  Amortization of deferred
    compensation.........................      --     --         --      --           --            5             --            --
  Dividends on preferred stock...........      --     --         --      --          (36)          --             --            --
  Net loss...............................      --     --         --      --           --           --         (3,355)           --
                                           ------    ---     ------   -----     --------       ------       --------      --------
Balance, December 31, 1992...............   1,777     17      2,474      23        7,529           (2)        (5,680)           --
  Sale of preferred stock................     250      3         --      --        1,997           --             --            --
  Shares issued to licensor..............      --     --          3      --           --           --             --            --
  Shares issued to preferred stockholder
    in lieu of cash dividends............      --     --          1      --           18           --             --            --
  Amortization of deferred
    compensation.........................      --     --         --      --           --            2             --            --
  Dividends on preferred stock...........      --     --         --      --          (36)          --             --            --
  Net loss...............................      --     --         --      --           --           --         (2,423)           --
                                           ------    ---     ------   -----     --------       ------       --------      --------
Balance, December 31, 1993...............   2,027     20      2,478      23        9,508           --         (8,103)           --
  Sale of preferred stock................   2,449     25         --      --       11,040           --             --            --
  Exercise of stock options..............      --     --         35       1           14           --             --            --
  Shares issued to preferred stockholder
    in lieu of cash dividends............      --     --         10       1           53           --             --            --
  Dividends on preferred stock...........      --     --         --      --          (18)          --             --            --
  Net loss...............................      --     --         --      --           --           --         (6,212)           --
                                           ------    ---     ------   -----     --------       ------       --------      --------
Balance, December 31, 1994...............   4,476     45      2,523      25       20,597           --        (14,315)           --
  Sale of preferred stock................   2,721     27         --      --       10,065           --             --            --
  Exercise of stock options and
    warrants.............................      --     --        116       1          329           --             --            --
  Shares issued to employees in lieu of
    cash compensation....................      --     --          8      --           44           --             --            --
  Deferred compensation related to grant
    of stock options.....................      --     --         --      --          360         (360)            --            --
  Shares issued to stockholder related to
    the initial public offering..........      --     --         23      --           --           --             --            --
  Shares issued to preferred stockholder
    in lieu of cash dividends............      --     --          3      --           18           --             --            --
  Dividends on preferred stock...........      --     --         --      --          (36)          --             --            --
  Conversion of preferred stock into
    common stock.........................  (1,417)   (14)       472       5            9           --             --            --
  Net loss...............................      --     --         --      --           --           --         (5,067)           --
                                           ------    ---     ------   -----     --------       ------       --------      --------
Balance, December 31, 1995...............   5,780    $58      3,145   $  31     $ 31,386       $ (360)      $(19,382)     $     --


                                           COMPREHENSIVE
                                               LOSS
                                            ACCUMULATED
                                            DURING THE
                                            DEVELOPMENT
                                               STAGE
                                           -------------
                                        
Balance, January 17, 1989 (inception)....    $     --
  Initial issuance of common stock.......          --
  Shares issued pursuant to consulting,
    licensing, and antidilutive
    agreements...........................          --
  Sale of common stock...................          --
  Net loss...............................        (460)
                                             --------
Balance, December 31, 1990...............        (460)
  Sale of stock..........................          --
  Shares issued pursuant to consulting
    and antidilutive agreements..........          --
  Capital contributions..................          --
  Dividends on preferred stock...........          --
  Net loss...............................      (1,865)
                                             --------
Balance, December 31, 1991...............      (2,325)
  Sale of stock..........................          --
  Shares issued pursuant to redemption of
    notes payable........................          --
  Exercise of stock options and
    warrants.............................          --
  Amortization of deferred
    compensation.........................          --
  Dividends on preferred stock...........          --
  Net loss...............................      (3,355)
                                             --------
Balance, December 31, 1992...............      (5,680)
  Sale of preferred stock................          --
  Shares issued to licensor..............          --
  Shares issued to preferred stockholder
    in lieu of cash dividends............          --
  Amortization of deferred
    compensation.........................          --
  Dividends on preferred stock...........          --
  Net loss...............................      (2,423)
                                             --------
Balance, December 31, 1993...............      (8,103)
  Sale of preferred stock................          --
  Exercise of stock options..............          --
  Shares issued to preferred stockholder
    in lieu of cash dividends............          --
  Dividends on preferred stock...........          --
  Net loss...............................      (6,212)
                                             --------
Balance, December 31, 1994...............     (14,315)
  Sale of preferred stock................          --
  Exercise of stock options and
    warrants.............................          --
  Shares issued to employees in lieu of
    cash compensation....................          --
  Deferred compensation related to grant
    of stock options.....................          --
  Shares issued to stockholder related to
    the initial public offering..........          --
  Shares issued to preferred stockholder
    in lieu of cash dividends............          --
  Dividends on preferred stock...........          --
  Conversion of preferred stock into
    common stock.........................          --
  Net loss...............................      (5,067)
                                             --------
Balance, December 31, 1995...............    $(19,382)


The accompanying notes are an integral part of these financial statements.

                                      F-5


                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
                   EQUITY AND COMPREHENSIVE LOSS--(CONTINUED)
                                 (IN THOUSANDS)



                                                                                                             DEFICIT
                                             CONVERTIBLE                                                   ACCUMULATED   UNREALIZED
                                           PREFERRED STOCK    COMMON STOCK     ADDITIONAL                  DURING THE     GAINS ON
                                           ---------------   ---------------    PAID-IN-      DEFERRED     DEVELOPMENT   MARKETABLE
                                           SHARES   AMOUNT   SHARES   AMOUNT    CAPITAL     COMPENSATION      STAGE      SECURITIES
                                           ------   ------   ------   ------   ----------   ------------   -----------   ----------
                                                                                                 
Balance, December 31, 1995...............   5,780    $58      3,145   $  31     $ 31,386       $(360)       $(19,382)     $     --
  Dividends on preferred stock...........      --     --         --      --          (18)         --              --            --
  Sale of common stock in initial public
    offering.............................      --     --      2,588      26       29,101          --              --            --
  Conversion of preferred stock into
    common stock.........................  (5,780)   (58)     2,411      24           34          --              --            --
  Exercise of stock options and
    warrants.............................      --     --         65       1          162          --              --            --
  Shares issued pursuant to employee
    stock purchase plan..................      --     --          6      --           60          --              --            --
  Deferred compensation related to
    acceleration of option vesting.......      --     --         --      --          106          --              --            --
  Amortization of deferred
    compensation.........................      --     --         --      --           --          90              --            --
  Net loss...............................      --     --         --      --           --          --          (6,141)           --
                                           ------    ---     ------   -----     --------       -----        --------      --------
Balance, December 31, 1996...............      --     --      8,215      82       60,831        (270)        (25,523)           --
  Sale of common stock in public
    offering.............................      --     --      1,250      13       20,326          --              --            --
  Exercise of stock options and
    warrants.............................      --     --         42      --          139          --              --            --
  Shares issued pursuant to employee
    stock purchase plan..................      --     --         18      --          189          --              --            --
  Deferred compensation related to grants
    of stock options.....................      --     --         --      --          322        (322)             --            --
  Amortization of deferred
    compensation.........................      --     --         --      --           --         231              --            --
  Net loss...............................      --     --         --      --           --          --          (9,064)           --
                                           ------    ---     ------   -----     --------       -----        --------      --------
Balance, December 31, 1997...............      --     --      9,525      95       81,807        (361)        (34,587)           --
  Exercise of stock options..............      --     --         49       1          261          --              --            --
  Shares issued pursuant to employee
    stock purchase plan..................      --     --         15      --          171          --              --            --
  Deferred compensation related to grants
    of stock options.....................      --     --         --      --          161        (161)             --            --
  Amortization of deferred
    compensation.........................      --     --         --      --           --         311              --            --
  Unrealized gains on marketable
    securities...........................      --     --         --      --           --          --              --           222
  Net loss...............................      --     --         --      --           --          --         (11,907)           --
                                           ------    ---     ------   -----     --------       -----        --------      --------
Balance, December 31, 1998...............      --     --      9,589      96       82,400        (211)        (46,494)          222
  Sales of common stock in private
    placements...........................      --     --      1,786      18       17,398          --              --            --
  Exercise of stock options and
    warrants.............................      --     --         43      --          263          --              --            --
  Shares issued pursuant to employee
    stock purchase plan..................      --     --         16      --          156          --              --            --
  Deferred compensation related to grants
    of stock options.....................      --     --         --      --          796        (796)             --            --
  Amortization of deferred
    compensation.........................      --     --         --      --           --         477              --            --
  Unrealized gains on marketable
    securities...........................      --     --         --      --           --          --              --          (222)
  Net loss...............................      --     --         --      --           --          --         (13,318)           --
                                           ------    ---     ------   -----     --------       -----        --------      --------
Balance December 31, 1999................      --    $--     11,434   $ 114     $101,013       $(530)       $(59,812)     $     --
                                           ======    ===     ======   =====     ========       =====        ========      ========


                                           COMPREHENSIVE
                                               LOSS
                                            ACCUMULATED
                                            DURING THE
                                            DEVELOPMENT
                                               STAGE
                                           -------------
                                        
Balance, December 31, 1995...............    $(19,382)
  Dividends on preferred stock...........          --
  Sale of common stock in initial public
    offering.............................          --
  Conversion of preferred stock into
    common stock.........................          --
  Exercise of stock options and
    warrants.............................          --
  Shares issued pursuant to employee
    stock purchase plan..................          --
  Deferred compensation related to
    acceleration of option vesting.......          --
  Amortization of deferred
    compensation.........................          --
  Net loss...............................      (6,141)
                                             --------
Balance, December 31, 1996...............     (25,523)
  Sale of common stock in public
    offering.............................          --
  Exercise of stock options and
    warrants.............................          --
  Shares issued pursuant to employee
    stock purchase plan..................          --
  Deferred compensation related to grants
    of stock options.....................          --
  Amortization of deferred
    compensation.........................          --
  Net loss...............................      (9,064)
                                             --------
Balance, December 31, 1997...............     (34,587)
  Exercise of stock options..............          --
  Shares issued pursuant to employee
    stock purchase plan..................          --
  Deferred compensation related to grants
    of stock options.....................          --
  Amortization of deferred
    compensation.........................          --
  Unrealized gains on marketable
    securities...........................         222
  Net loss...............................     (11,907)
                                             --------
Balance, December 31, 1998...............     (46,272)
  Sales of common stock in private
    placements...........................          --
  Exercise of stock options and
    warrants.............................          --
  Shares issued pursuant to employee
    stock purchase plan..................          --
  Deferred compensation related to grants
    of stock options.....................          --
  Amortization of deferred
    compensation.........................          --
  Unrealized gains on marketable
    securities...........................        (222)
  Net loss...............................     (13,318)
                                             --------
Balance December 31, 1999................    $(59,812)
                                             ========


The accompanying notes are an integral part of these financial statements.

                                      F-6


                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



                                                                                                   PERIOD FROM
                                                                                                    INCEPTION
                                                                                                  (JANUARY 17,
                                                                  YEAR ENDED DECEMBER 31,             1989)
                                                              --------------------------------   TO DECEMBER 31,
                                                                1997       1998        1999           1999
                                                              --------   --------   ----------   ---------------
                                                                                     
Cash flows from operating activities:
  Net loss..................................................  $ (9,064)  $(11,907)  $  (13,318)    $  (59,812)
  Adjustments to reconcile net loss to cash used in
    operating activities:
    Depreciation and amortization...........................     1,117      2,149        2,172          7,377
    Common stock issued for noncash charges and other.......        --         --           --             35
    Changes in operating assets and liabilities:
      Prepaid expenses and other............................      (292)       282          117           (118)
      Accounts payable......................................       130       (302)         192            237
      Accrued expenses......................................       477       (338)         822          1,430
      Deferred revenue......................................      (121)        --          805            805
                                                              --------   --------   ----------     ----------
         Net cash used in operating activities..............    (7,753)   (10,116)      (9,210)       (50,046)
                                                              --------   --------   ----------     ----------
Cash flows from investing activities:
  Purchases of property and equipment.......................   (10,803)      (761)      (1,207)       (17,731)
  Proceeds from sale-leaseback of equipment.................        --         --           --          1,382
  Purchases of marketable securities........................   (26,808)   (24,315)     (88,662)      (139,785)
  Proceeds from sales of marketable securities..............       603      1,982        8,882         11,467
  Proceeds from maturities of and other changes in
    marketable
    securities..............................................        --     26,221       79,227        105,448
  Purchase of acquired technology...........................        --         --       (3,550)        (3,550)
  Restricted cash related to acquired technology............        --         --       (1,500)        (1,500)
                                                              --------   --------   ----------     ----------
         Net cash provided by (used in) investing
           activities.......................................   (37,008)     3,127       (6,810)       (44,269)
                                                              --------   --------   ----------     ----------
Cash flows from financing activities:
  Proceeds from issuance of debt............................     9,329         --           --         11,955
  Repayment of debt.........................................      (677)    (1,040)        (617)        (4,952)
  Restricted cash related to debt...........................      (305)       (18)        (317)          (714)
  Proceeds from issuance of preferred stock, net............        --         --           --         29,497
  Proceeds from issuance of common stock, net...............       189        171       17,572         18,277
  Proceeds from public offerings, net.......................    20,339         --           --         49,466
  Proceeds from exercise of stock options and warrants......       139        262          263          1,223
  Dividends paid............................................        --         --           --            (72)
                                                              --------   --------   ----------     ----------
         Net cash provided by (used in) financing
           activities.......................................    29,014       (625)      16,901        104,680
                                                              --------   --------   ----------     ----------
Net increase (decrease) in cash and cash equivalents........   (15,747)    (7,614)         881         10,365
Cash and cash equivalents, beginning of period..............    32,845     17,098        9,484             --
                                                              --------   --------   ----------     ----------
Cash and cash equivalents, end of period....................  $ 17,098   $  9,484   $   10,365     $   10,365
                                                              ========   ========   ==========     ==========
Supplemental disclosure of cash flow information:
    Cash paid for interest..................................  $    511   $    548   $      429     $    2,538
                                                              ========   ========   ==========     ==========
Noncash financing activities:
    Issuance of common stock for dividends..................  $     --   $     --   $       --     $       90
                                                              ========   ========   ==========     ==========
    Issuance of common stock to employees in lieu of cash
      compensation..........................................  $     --   $     --   $       --     $       44
                                                              ========   ========   ==========     ==========


The accompanying notes are an integral part of these financial statements.

                                      F-7

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BACKGROUND

     Neose, a development-stage company, is a leading developer of proprietary
technologies for the synthesis and manufacture of complex carbohydrates. Our
proprietary enzymatic glycosylation technology platform enables the rapid and
cost-effective synthesis of a wide range of complex carbohydrates in commercial
quantities. We use our broad, enabling technology to produce these complex
carbohydrates for pharmaceutical, biotechnology, nutritional, and consumer
product applications.

     We commenced operations in August 1990. We have not generated any material
revenues from operations, except for interest income and revenues from
collaborative agreements. We have incurred operating losses each year and, given
our planned level of operating expenses, we may continue to incur operating
losses for some time. As of December 31, 1999, we had an accumulated deficit of
approximately $60 million. We expect additional losses for some time as we
expand research and development efforts, expand manufacturing scale-up
activities, and begin sales and marketing activities. We may continue to incur
substantial operating losses even if our revenues increase. Our future operating
results are subject to certain additional risks and uncertainties.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

     The consolidated financial statements include the accounts of Neose
Technologies, Inc. and its wholly-owned subsidiaries. The financial statements
reflect the elimination of all significant intercompany accounts and
transactions.

Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the amounts reported in the financial statements. Actual results
could differ from those estimates.

Cash and Cash Equivalents

     We consider all highly liquid investments with a maturity of three months
or less on the date of purchase to be cash equivalents.

Marketable Securities

     In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," we determine
the appropriate classification of our debt securities at the time of purchase
and re-evaluate such designation as of each balance sheet date. Marketable
securities that we have the positive intent and ability to hold to maturity are
classified as held-to-maturity securities and recorded at amortized cost. Our
other marketable securities are classified as available-for-sale securities and
are carried at fair value, based on quoted market prices, with unrealized gains
and losses reported as a separate component of stockholders' equity. All
realized gains and losses on our available-for-sale securities, computed using
specific identification, and any declines in value determined to be permanent
are recognized in the Consolidated Statements of Operations. As of December 31,
1999, all marketable securities were classified as "held-to-maturity"
securities.

     Marketable securities consist of investments that have a maturity of more
than three months on the date of purchase. To maintain the safety and liquidity
of our marketable securities, we have established guidelines for the
concentration, maturities, and credit ratings of our investments.

                                      F-8

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Property and Equipment

     Property and equipment are stated at cost. Property and equipment
capitalized under capital leases are recorded at the present value of the
minimum lease payments due over the lease term. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives of
the related assets or the lease term, whichever is shorter. We use depreciable
lives of three to seven years for computer, office, research, and manufacturing
equipment, and eighteen to twenty years for building and improvements.

Impairment of Long-Lived Assets

     As required by SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," we assess the
recoverability of any long-lived assets for which an indicator of impairment
exists. Specifically, we calculate, and recognize, any impairment losses by
comparing the carrying value of these assets to our estimate of the undiscounted
future operating cash flows. Although our current and historical operating and
cash flows are indicators of impairment, we believe the future cash flows to be
received from our long-lived assets will exceed the assets' carrying value.
Accordingly, we have not recognized any impairment losses through December 31,
1999.

Research and Development

     Research and development costs are charged to expense as incurred.

Income Taxes

     We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The objective of
this pronouncement is to recognize and measure, using enacted tax laws, the
amount of current and deferred income taxes payable or refundable at the date of
the financial statements as a result of all events that have been recognized in
the financial statements.

Net Loss Per Share

     Basic loss per share is computed by dividing net loss by the
weighted-average number of common shares outstanding for the period. Diluted
loss per share reflects the potential dilution from the exercise or conversion
of securities into common stock. For the years ended December 31, 1997, 1998,
and 1999, the effects of the exercise of outstanding stock options and warrants
were antidilutive; accordingly, they were excluded from the calculation of
diluted loss per share.

Revenue Recognition

     We record revenue from collaborative agreements either when we perform
specified services or ratably over the term of the applicable agreement.

New Accounting Pronouncements

     In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be applied, and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We are evaluating SAB 101 and the effect it may have on our
financial statements. At this time, we believe that SAB 101 will not have a
material impact on our financial position or results of operations.

                                      F-9

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. COLLABORATIVE AGREEMENTS

Agreement with McNeil

     During 1999, we entered into a joint venture with the McNeil Specialty
Products Division of Johnson & Johnson for the large-scale enzymatic production
of fructooligosaccharides (FOS) and other complex carbohydrates. The joint
venture is focused on the development and marketing of FOS and other related
compounds for a number of large commercial applications, including:

     o Bulking agents for sucralose, McNeil's recently approved no-calorie
       sweetener;
     o Nutraceutical food supplements that foster the growth of desirable
       bacteria in the human gastro-intestinal tract;
     o Low-cost, high-quality ingredients for use in foods such as cereals and
       ice creams;
     o Antibiotic replacements in animal and poultry feeds; and
     o Oral health products.

     The joint venture is owned equally by Neose and McNeil. Each of Neose and
McNeil contributed various intellectual property owned by it to the joint
venture, and all of the intellectual property developed by the parties under an
earlier research and development agreement was similarly contributed to the
joint venture. In addition, McNeil contributed to the joint venture the initial
commercial manufacturing facility, for which 50% of the cost will be reimbursed
by the joint venture.

     If the joint venture builds additional production facilities, and we wish
to maintain our 50% ownership in the joint venture, we are required to
contribute half of the expenditures, up to a maximum contribution of $8.85
million. However, we may elect to contribute as little as $1.85 million of the
cost of the facilities, so long as our aggregate capital contributions are at
least 15% of the joint venture's aggregate capital contributions. In this case,
McNeil will fund the remainder of our half of the joint venture's capital
expenditures, and our ownership percentage will be appropriately reduced. We
have an option, expiring in September 2006, to return to 50% ownership in the
joint venture by reimbursing McNeil for these amounts. In addition, until the
joint venture is profitable, McNeil is required to fund, as a non-recourse,
no-interest loan, all of the joint venture's aggregate capital expenditures in
excess of $20 million, and all of the joint venture's operating losses. These
loans would be repayable by the joint venture to McNeil over seven years, and in
the event of any dissolution of the joint venture would be payable to McNeil
before any distribution of assets to us. McNeil has the exclusive right to
purchase the joint venture's bulking agent for use in specified consumer product
applications at a constant mark-up over the joint venture's cost.

     We will account for our investment in the joint venture under the equity
method, under which we will recognize our share of losses or earnings of the
joint venture. We will record our share of the losses of the joint venture,
however, only to the extent of our actual or committed investment in the joint
venture. In 1999, we recorded a loss from operations of the joint venture of
$345,000, which is included in research and development expense.

     The success of our joint venture with McNeil is dependent upon the joint
venture's ability to manufacture, sell, and market successfully complex
carbohydrates. If the joint venture is unsuccessful in these efforts, it will
not be profitable and our business, financial condition, and results of
operations will be materially and adversely affected.

Agreement with Bristol-Myers

     In 1998, we entered into an agreement with Bristol-Myers Squibb Company to
develop proprietary technologies that enable cGMP processes for the manufacture
of two gangliosides (complex carbohydrate structures attached to a lipid) for
use as the active pharmaceutical ingredients in two cancer vaccines being
developed by Bristol-Myers. During the years ended December 31, 1998 and 1999,
we recorded revenues of $375,000 and $205,000, respectively, from Bristol-Myers.

                                      F-10

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. COLLABORATIVE AGREEMENTS -- (CONTINUED)

     Under our current agreements with Bristol-Myers, we expect to be paid for
process development, and for the delivery of qualified materials for clinical
trial use, and for stability and other pre-launch needs. Bristol-Myers may
terminate the development agreement on 90 days' prior notice. If Bristol-Myers
proceeds with GMK or MGV, we expect to enter into a mutually exclusive long-term
manufacturing and supply agreement to supply Bristol-Myers' commercial
requirements for the vaccines.

     Even if we successfully complete development of these processes, and
fulfill all of our obligations under the agreement, Bristol-Myers may not obtain
regulatory approval to market either of these vaccines. Further, even if
Bristol-Myers obtains regulatory approval to market either of these vaccines, we
cannot be sure that Bristol-Myers will enter into a contract with us for the
manufacture of complex carbohydrates for the vaccines, or that the terms of a
future contract with Bristol-Myers will be favorable to us.

Agreement with Wyeth

     During 1999, we entered into an agreement with Wyeth Nutritionals, a
division of American Home Products, to develop a manufacturing process for a
bioactive carbohydrate to be used as an ingredient in Wyeth's infant and
pediatric nutritional formula products. We will develop a large-scale
manufacturing process for this ingredient, and Wyeth plans the introduction of
these proprietary ingredients into its infant formula lines. We will receive
contract development payments and milestone payments, and will sell product to
Wyeth upon commercialization.

     In 1999, we received a non-refundable, up-front license fee of $500,000 and
research funding for November 1999 through April 2000 of $500,000. The
non-refundable, up-front license fee will be recognized as revenue ratably over
the three-year development program. As of December 31, 1999, we deferred
$333,000 of the research funding, calculated as the amount relating to 2000.

     We may fail to develop a large-scale manufacturing process successfully or
in a cost-effective or efficient manner. Even if we successfully develop a
process, and fulfill all of our obligations under the agreement, Wyeth may fail
to obtain regulatory approval to market the ingredient. Moreover, even if Wyeth
obtains regulatory approval for the ingredient, Wyeth may determine the
incremental cost of adding the ingredient to infant formula exceeds the benefit
to Wyeth.

Agreement with Abbott

     Abbott Laboratories has a non-exclusive license to use our technology to
manufacture and commercialize, for nutritional purposes only, any complex
carbohydrate naturally found in human breast milk. If Abbott commercializes any
product manufactured using our technology, we will receive fees from Abbott tied
to commercial quantities. During the year ended December 31, 1997, we recognized
$500,000 of revenue under our collaborative agreement with Abbott.

Agreement with Bracco

     We recognized approximately $209,000 of revenue under our collaborative
research agreement with Bracco Research USA Inc. for the year ended December 31,
1997. We mutually agreed to terminate our research collaboration in September
1997.

                                      F-11

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. MARKETABLE SECURITIES

     As of December 31, 1998 and 1999, marketable securities consisted of
securities and obligations of either the U.S. Treasury or U.S. government
agencies. The following summary contains additional information about our
marketable securities (in thousands):



DECEMBER 31,                                                    1998       1999
- ------------                                                  --------   --------
                                                                   
Available-for-sale securities
  Cost......................................................  $ 30,303   $  9,483
  Gross unrealized gains....................................       222         --
  Amortized discount........................................        --         52
                                                              --------   --------
  Fair value of available-for-sale securities...............    30,525      9,535
  Less amounts classified as cash equivalents...............    (7,986)    (9,535)
                                                              --------   --------
Total available-for-sale securities.........................    22,539         --
Held-to-maturity securities (at amortized cost).............        --     22,870
                                                              --------   --------
                                                              $ 22,539   $ 22,870
                                                              ========   ========


     The weighted-average maturity of our marketable securities as of December
31, 1999 was five months. During the years ended December 31, 1998 and 1999, we
received proceeds from the sales of marketable securities of approximately
$1,982,000 and $8,882,000, respectively. Realized gains on these sales for the
years ended December 31, 1998 and 1999 were approximately $74,000 and $796,000,
respectively.

NOTE 5. PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following (in thousands):



DECEMBER 31,                                                    1998       1999
- ------------                                                  --------   --------
                                                                   
Building and improvements...................................  $ 13,212   $ 13,524
Research equipment..........................................     2,652      3,068
Manufacturing equipment.....................................       842      1,178
Computer and office equipment...............................       411        528
                                                              --------   --------
                                                                17,117     18,298
Less accumulated depreciation and amortization..............    (4,278)    (5,632)
                                                              --------   --------
                                                                12,839     12,666
Land........................................................       700        700
                                                              --------   --------
                                                              $ 13,539   $ 13,366
                                                              ========   ========


     Depreciation and amortization expense was approximately $1,838,000 and
$1,380,000 for the years ended December 31, 1998 and 1999, respectively.

NOTE 6. ACQUIRED TECHNOLOGY

     On March 26, 1999, we acquired the carbohydrate manufacturing patents,
licenses, and other intellectual property of Cytel Corporation's Glytec business
unit. We paid $3.5 million in cash to Cytel and an additional $1.5 million in
cash into escrow, the release of which is conditioned on Cytel's satisfaction,
prior to September 26, 2000, of certain matters relating to the acquired patents
and licenses. We have recorded the $1.5 million placed into escrow as Restricted
Cash on our December 31, 1999 Consolidated Balance Sheet.

                                      F-12

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6. ACQUIRED TECHNOLOGY -- (CONTINUED)

     Because the acquired intellectual property consists of core technology with
alternative future uses, we have capitalized $3.3 million of the amount paid to
Cytel as Acquired Technology. The remaining $200,000 was paid to Cytel from an
escrow account funded by us in 1998. This amount was charged to expense in our
1998 Consolidated Statement of Operations.

     In addition, we agreed to pay Cytel up to an additional $1.6 million in
cash, contingent on potential payments and revenues realized by us from certain
future corporate collaborations, as long as we enter into any such collaboration
by March 26, 2000. We are obligated to pay $250,000 of the $1.6 million as a
result of entering into a Collaboration and License Agreement with the Wyeth
Nutritionals Division of American Home Products (see Note 3). This amount has
also been capitalized as Acquired Technology on our December 31, 1999
Consolidated Balance Sheet. Any cash remaining in the escrow account on
September 26, 2000 will be returned to us and will be available for general
corporate purposes. The Acquired Technology balance will be amortized to our
Consolidated Statement of Operations over eight years, which we estimate to be
the useful life of the technology. During the year ended December 31, 1999, we
recorded amortization expense of $315,000 relating to the Acquired Technology.

NOTE 7. ACCRUED EXPENSES

     Accrued expenses consisted of the following (in thousands):



DECEMBER 31,                                                   1998         1999
- ------------                                                  -------      -------
                                                                     
Accrued compensation........................................  $   330      $   455
Accrued professional fees...................................      200          348
Amount due to joint venture with McNeil.....................       --          345
Accrued acquired technology.................................       --          250
Accrued clinical expenses...................................      250          199
Accrued royalty expense.....................................      142          142
Accrued outside research expenses...........................      183          123
Accrued other expenses......................................      185          250
                                                              -------      -------
                                                              $ 1,290      $ 2,112
                                                              =======      =======


NOTE 8. LONG-TERM DEBT

     Long-term debt consisted of the following (in thousands):



DECEMBER 31,                                                   1998         1999
- ------------                                                  -------      -------
                                                                     
MCIDA bond issuance.........................................  $ 8,900      $ 8,300
Other.......................................................       17           --
                                                              -------      -------
                                                                8,917        8,300
Less current portion........................................     (617)      (1,000)
                                                              -------      -------
                                                              $ 8,300      $ 7,300
                                                              =======      =======


     Minimum principal repayments of long-term debt as of December 31, 1999 were
as follows (in thousands): 2000--$1,000; 2001--$1,100; 2002--$1,100;
2003--$1,200; 2004--$1,200; and thereafter--$2,700 (2005--$100; 2006--$200;
2007--$100; 2008 through 2011--$200; 2012--$300; 2013--$200; 2014--$300;
2015--$200; 2016--$300; and 2017--$200).

                                      F-13

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. LONG-TERM DEBT -- (CONTINUED)

MCIDA Bond Issuance

     In 1997, we issued, through the Montgomery County (Pennsylvania) Industrial
Development Authority, $9.4 million of taxable and tax-exempt bonds. The bonds
were issued to finance the purchase of our previously leased building and the
construction of a pilot-scale manufacturing facility within our building. The
bonds are supported by a AA-rated letter of credit, and a reimbursement
agreement between our bank and the letter of credit issuer. The interest rate on
the bonds will vary weekly, depending on market rates for AA-rated taxable and
tax-exempt obligations, respectively. During 1999, the weighted-average,
effective interest rate was 6.5% per year, including letter-of-credit and other
fees.

     The terms of the bond issuance provide for monthly, interest-only payments
and a single repayment of principal at the end of the twenty-year life of the
bonds. However, under our agreement with our bank, we are making monthly
payments to an escrow account to provide for an annual prepayment of principal.

     As of December 31, 1999, we had Restricted Cash relating to the bonds of
$785,000, which consisted of our monthly payments to an escrow account plus
interest revenue on the balance in the escrow account.

     To provide credit support for the bond issuance, we have given a first
mortgage on the land, building, improvements, and certain machinery and
equipment to our bank. In addition, we have agreed to maintain at least $20
million of cash and short-term investments. If we fail to comply with this
covenant, we are required to deposit with the lender cash collateral up to, but
not more than, the loan's unpaid balance, which was $8.3 million as of December
31, 1999.

Capital Lease Obligation

     In June 1995, we entered into a master equipment lease agreement with a
finance company. We borrowed $1.4 million under the agreement. As of December
31, 1998, we had satisfied our obligations under the agreement. In connection
with the lease, we granted the lessor a warrant to purchase 10,527 shares of
common stock at $14.25 per share. The stock warrant, which expires on June 30,
2002, remained outstanding as of December 31, 1999.

NOTE 9. STOCKHOLDERS' EQUITY

Common Stock

     On June 29, 1999, we sold 1.5 million shares of common stock in a private
placement to a group of institutional and individual investors at a price of
$9.50 per share, generating net proceeds of approximately $13.4 million. On
January 13, 1999, we sold 286,097 shares of common stock to Johnson & Johnson
Development Corporation at a price of $13.98 per share, generating net proceeds
of $4 million.

     On January 29, 1997, we sold 1,250,000 shares of common stock in a public
offering at a price of $17.50 per share. Our net proceeds from this offering
after the payment of placement fees and offering expenses were approximately
$20,339,000.

     Our initial public offering closed on February 22, 1996. We sold 2,587,500
shares, which included the exercise of the underwriters' over-allotment option
on March 4, 1996, of common stock at a price of $12.50 per share. Our net
proceeds from this offering after the underwriting discount and payment of
offering expenses were approximately $29,127,000. In connection with this
offering, all outstanding shares of Series A, C, D, E, and F Convertible
Preferred Stock converted into 2,410,702 shares of common stock. Some of these
common shares have registration rights.

                                      F-14

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. STOCKHOLDERS' EQUITY -- (CONTINUED)

     From 1991 through 1995, we sold 7,196,884 shares of Series A, B, C, D, E,
and F Convertible Preferred Stock. On December 7, 1995, all outstanding shares
of Series B Convertible Preferred Stock converted into 472,249 shares of common
stock. As discussed above, in connection with the initial public offering, all
outstanding shares of Series A, C, D, E, and F converted into 2,410,702 shares
of common stock.

Shareholder Rights Plan

     In September 1997, we adopted a Shareholder Rights Plan. Under this plan,
which was amended in December 1998, holders of common stock are entitled to
receive one right for each share of common stock held. Separate rights
certificates would be issued and become exercisable if any acquiring party
either accumulates or announces an offer to acquire at least 15% of our common
stock. Each right will entitle any holder who owns less than 15% of our common
stock to buy one one-hundredth share of the Series A Junior Participating
Preferred Stock at an exercise price of $150 per unit. Each one one-hundredth
share of the Series A Junior Participating Preferred Stock is essentially
equivalent to one share of our common stock. If an acquiring party accumulates
at least 15% of our common stock, each right entitles any holder who owns less
than 15% of our common stock to purchase for $150 either $300 worth of our
common stock or $300 worth of the 15% acquiror's common stock. The rights expire
in September 2007 and may be redeemed by us at a price of $.01 per right at any
time up to ten days after they become exercisable.

NOTE 10. EMPLOYEE BENEFIT PLANS

Stock Option Plans

     We have three stock option plans, the 1991, 1992, and 1995 Stock Option
Plans, under which a total of 2,511,666 shares of common stock have been
reserved. The 1995 Stock Option Plan, which incorporates the two predecessor
plans, provides for the granting of both incentive stock options and
nonqualified stock options to our employees, officers, directors, and
consultants. In addition, the plan allows us to issue shares of common stock
directly either through the immediate purchase of shares or as a bonus tied to
either an individual's performance or our attainment of prescribed milestones.
Incentive stock options may not be granted at an exercise price less than the
fair market value on the date of grant. In addition, the plan includes stock
appreciation rights to be granted at our discretion. The stock options are
exercisable over a period, which may not exceed ten years from the date of
grant, determined by our board of directors.

     We have elected to adopt the disclosure provisions only of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," or SFAS 123. Accordingly, we apply APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for our stock-based compensation plans. We record deferred
compensation for option grants to employees for the amount, if any, the market
price per share exceeds the exercise price per share. In addition, we record
deferred compensation for option grants to non-employees in the amount of the
fair value per share, as computed using the Black-Scholes option-pricing model
and variable plan accounting. We amortize deferred compensation amounts over the
vesting periods of each option. We recognized compensation expense of
approximately $231,000, $311,000, and $477,000 for the years ended December 31,
1997, 1998, and 1999, respectively.

     The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model. We used the following
weighted-average assumptions for 1997, 1998, and 1999 grants, respectively:
risk-free interest rate of 5.8%, 4.6%, and 5.9%; an expected life of 5.3, 5.1,
and 5.2 years;

                                      F-15

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

volatility of 60%; and a dividend yield of zero. If we had elected to record
compensation cost for our stock-based compensation plans consistent with SFAS
123, our net loss and basic and diluted net loss per share would have been
increased to the pro forma amounts indicated below (in thousands, except per
share data):



                                                             1997           1998           1999
                                                           --------       --------       --------
                                                                                
Net loss--as reported....................................  $ (9,064)      $(11,907)      $(13,318)
Net loss--pro forma......................................  $(11,524)      $(14,756)      $(15,853)
Basic and diluted net loss per share--as reported........  $  (0.96)      $  (1.25)      $  (1.25)
Basic and diluted net loss per share--pro forma..........  $  (1.23)      $  (1.54)      $  (1.48)


     A summary of the status of our stock option plans as of December 31, 1997,
1998, 1999 and changes during each of the years then ended, is presented below:



                                         1997                      1998                      1999
                                -----------------------   -----------------------   -----------------------
                                              WEIGHTED-                 WEIGHTED-                 WEIGHTED-
                                               AVERAGE                   AVERAGE                   AVERAGE
                                              EXERCISE                  EXERCISE                  EXERCISE
                                  NUMBER        PRICE       NUMBER        PRICE       NUMBER        PRICE
                                OUTSTANDING   PER SHARE   OUTSTANDING   PER SHARE   OUTSTANDING   PER SHARE
                                -----------   ---------   -----------   ---------   -----------   ---------
                                                                                
Balance at January 1..........   1,201,087     $10.03      1,564,176     $11.73      1,785,489     $12.15
  Granted.....................     419,704      15.76        312,212      13.38        443,626      13.22
  Exercised...................     (41,618)      3.40        (50,320)      5.40        (35,663)      7.41
  Canceled....................     (14,997)     11.48        (40,579)     13.69        (41,415)     14.15
                                 ---------     ------      ---------     ------      ---------     ------
Balance at December 31........   1,564,176     $11.73      1,785,489     $12.15      2,152,037     $12.41
                                 =========     ======      =========     ======      =========     ======
Options exercisable at
  December 31.................     636,164     $ 7.84        930,954     $ 9.82      1,242,583     $11.07
                                 =========     ======      =========     ======      =========     ======


     A summary of options granted at exercise prices equal to, greater than, and
less than the market price on the date of grant is presented below:



YEAR ENDED DECEMBER 31,                                    1997             1998             1999
- -----------------------                                  --------         --------         --------
                                                                                  
Price = Market Value
          Options granted.......................          402,665          306,165          397,366
          Weighted-average exercise price.......         $  15.75         $  13.55         $  12.17
          Weighted-average fair value...........         $   8.97         $   7.48         $   6.89

Price > Market Value
          Options granted.......................           10,000               --           40,000
          Weighted-average exercise price.......         $  20.50         $     --         $  25.00
          Weighted-average fair value...........         $   8.86         $     --         $   5.50

Price < Market Value
          Options granted.......................            7,039            6,047            6,260
          Weighted-average exercise price.......         $   9.68         $   4.92         $   4.75
          Weighted-average fair value...........         $  13.70         $  11.40         $  11.01


                                      F-16

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. EMPLOYEE BENEFIT PLANS -- (CONTINUED)

     The following table summarizes information about stock options outstanding
as of December 31, 1999:



                           OPTIONS OUTSTANDING                                       OPTIONS EXERCISABLE
- --------------------------------------------------------------------------       ---------------------------
                                               WEIGHTED-         WEIGHTED-                         WEIGHTED-
                                                AVERAGE           AVERAGE                           AVERAGE
      RANGE OF                NUMBER           REMAINING         EXERCISE          NUMBER          EXERCISE
   EXERCISE PRICES          OUTSTANDING       LIFE (YEARS)         PRICE         EXERCISABLE         PRICE
   ---------------          -----------       ------------       ---------       -----------       ---------
                                                                                    
   $ 0.90 - $12.54             822,952              5.7           $ 7.67            651,889         $ 7.05
   $12.69 - $14.56             717,755              8.8            13.63            214,405          13.62
   $14.63 - $30.00             611,330              7.4            17.36            376,289          16.59
                             ---------                                            ---------
   $ 0.90 - $30.00           2,152,037              7.2           $12.41          1,242,583         $11.07
                             =========                                            =========


     The weighted-average fair value of employee purchase rights granted under
our employee stock purchase plan (see below) in 1997, 1998, and 1999 was $5.97,
$6.05, and $6.25, respectively. The fair value of the purchase rights was
estimated using the Black-Scholes model with the following weighted-average
assumptions for 1997, 1998, and 1999, respectively: risk-free interest rate of
5.7%, 4.6%, and 6.5%; an expected life of seventeen, seventeen, and eighteen
months; volatility of 60%; and a dividend yield of zero.

Employee Stock Purchase Plan

     We maintain an employee stock purchase plan, or ESPP, that allows any
eligible employee the opportunity to purchase shares of our common stock through
payroll deductions at the end of semiannual purchase periods. Any employee who
is expected to work at least 20 hours per week for at least five months per
calendar year is eligible to participate. The ESPP, which became effective in
February 1996, provides for successive, two-year offering periods, each of which
is contemplated to have four semiannual purchase periods. Pursuant to the ESPP,
100,000 shares of common stock were reserved for issuance. The purchase price is
85% of the lower of the market price per share on the employee's entry date into
the offering period or the market price per share on the purchase date. Any
employee who owns less than 5% of our common stock may purchase up to the lesser
of:

     o 10% of his or her eligible compensation;
     o 1,000 shares per purchase; or
     o the number of shares per year that does not exceed the quotient of
       $25,000 divided by the market price per share on the employee's entry
       date into the offering period.

     A total of 76,712, 61,632, and 46,092 shares of common stock remained
available for issuance under the ESPP at December 31, 1997, 1998, and 1999,
respectively. The total purchases of common stock under the ESPP during the
years ended December 31, 1997, 1998, and 1999, were 17,657 shares at a total
purchase price of approximately $189,000, 15,080 shares at a total purchase
price of approximately $171,000, and 15,540 shares at a total purchase price of
approximately $156,000, respectively. We have not recorded any compensation
expense for the ESPP.

NOTE 11. COMMITMENTS

License Agreements

     We have entered into agreements with various institutions under which we
have been granted licenses to use patent rights and technology. Typically, these
agreements will terminate upon the expiration of the applicable patent rights,
and require us to reimburse the licensor for all reasonable fees related to the

                                      F-17

                   NEOSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                         (A DEVELOPMENT-STAGE COMPANY)

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11. COMMITMENTS -- (CONTINUED)

acquisition and maintenance of the patents licensed to us. In addition, we
usually are required to pay royalties to the licensor based on either sales of
applicable products by us or specified license fees, milestone fees, and
royalties received by us from sublicensees, or both.

NOTE 12. INCOME TAXES

     As of December 31, 1999, we had net operating loss carryforwards for
federal and state income tax purposes of approximately $8,257,000 and
$3,620,000, respectively. In addition, we had federal research and development
credit carryforwards of approximately $1,497,000. These carryforwards begin to
expire in 2004. Due to the uncertainty surrounding the realization of the tax
benefit associated with these carryforwards, we have provided a full valuation
allowance against this tax benefit. In addition, pursuant to the Tax Reform Act
of 1986, the annual utilization of our net operating loss carryforwards will be
limited. We do not believe that these limitations will have a material adverse
impact on the utilization of our net operating loss carryforwards.

     The approximate income tax effect of each type of temporary difference and
carryforward is as follows (in thousands):



DECEMBER 31,                                                    1998           1999
- ------------                                                  --------       --------
                                                                       
Benefit of net operating loss carryforwards.................  $  2,535       $  3,159
Research & development credit carryforwards.................     1,169          1,497
Capitalized research and development........................     8,360         10,615
Start-up costs..............................................     5,594          7,204
Nondeductible depreciation and amortization.................     1,737          2,414
Deferred compensation.......................................       299            493
Accrued expenses not currently deductible...................       199            352
Deferred revenue............................................        --            192
Other.......................................................      (223)          (468)
                                                              --------       --------
                                                                19,670         25,458
Valuation allowance.........................................   (19,670)       (25,458)
                                                              --------       --------
                                                              $     --       $     --
                                                              ========       ========


NOTE 13. RELATED-PARTY TRANSACTIONS

     Paramount Capital, Inc., of which the sole shareholder is a member of our
Board of Directors, acted as a finder for our private placement of common stock
in June 1999 (see Note 9). We paid Paramount Capital $783,750 for its assistance
in completing the private placement. Entities affiliated with Paramount Capital
purchased 110,000 shares of common stock in the private placement.

     In 1997, we entered into an agreement with an employee of Paramount Capital
for consulting services. Under the agreement, which may be terminated by either
party upon sixty days prior notice, we granted the consultant options to
purchase 15,000 shares of common stock at prices equal to and in excess of the
then market price. The weighted-average exercise price of the options is $18.00
per share. The options vest in equal, annual amounts over four years. In
addition, we are obligated to pay the consultant an annual amount of $50,000.
During 1999, we granted the consultant an additional option to purchase 30,000
shares of common stock at an exercise price of $10.38, the market price on the
date of grant. The option vests in equal, annual amounts in 2002 and 2003.

                                      F-18

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, we have duly caused this report to be signed on our behalf
by the undersigned, thereunto duly authorized.

                                              NEOSE TECHNOLOGIES, INC.

Date: February 23, 2000                       By /s/ Stephen A. Roth
                                                 -----------------------------
                                                 Stephen A. Roth
                                                 Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Neose and in
the capacities and on the dates indicated.

     Each person, in so signing also makes, constitutes, and appoints Stephen A.
Roth, Chief Executive Officer of Neose, and P. Sherrill Neff, President and
Chief Financial Officer of Neose, and each of them acting alone, as his true and
lawful attorneys-in-fact, with full power of substitution, in his name, place,
and stead, to execute and cause to be filed with the Securities and Exchange
Commission any or all amendments to this report.



                NAME                                CAPACITY                      DATE
                ----                                --------                      ----
                                                                      
/s/ Stephen A. Roth                   Chief Executive Officer and Chairman  February 23, 2000
- ------------------------------------  of the Board (Principal Executive
Stephen A. Roth                       Officer)

/s/ P. Sherrill Neff                  President and Chief Financial         February 23, 2000
- ------------------------------------  Officer and Director (Principal
P. Sherrill Neff                      Financial and Accounting Officer)

/s/ William F. Hamilton               Director                              February 23, 2000
- ------------------------------------
William F. Hamilton

/s/ Douglas J. MacMaster, Jr.         Director                              February 23, 2000
- ------------------------------------
Douglas J. MacMaster, Jr.

/s/ Mark H. Rachesky                  Director                              February 23, 2000
- ------------------------------------
Mark H. Rachesky

/s/ Lindsay A. Rosenwald              Director                              February 23, 2000
- ------------------------------------
Lindsay A. Rosenwald

/s/ Lowell E. Sears                   Director                              February 23, 2000
- ------------------------------------
Lowell E. Sears

/s/ Jerry A. Weisbach                 Director                              February 23, 2000
- ------------------------------------
Jerry A. Weisbach



                                 EXHIBIT INDEX

 EXHIBIT
 NUMBER    DESCRIPTION
 -------   -----------
 3.1       Second Amended and Restated Certificate of Incorporation.
           (Exhibit 3.1)(1)

 3.2       Amended and Restated By-Laws. (Exhibit 3.3)(5)

 3.4       Certificate of Designation establishing and designating the
           Series A Junior Participating Preferred Stock. (Exhibit
           3.2)(5)

 4.2       See Exhibits 3.1, 3.2, and 3.3 for instruments defining
           rights of holders of common stock.

 4.2       Representation pursuant to Item 601(b)(4)(iii)(A) of
           Regulation S-K. (Exhibit 4.1)(3)

 4.3       Trust Indenture, dated as of March 1, 1997, between
           Montgomery County Industrial Development Authority and
           Dauphin Deposit Bank and Trust Company. (Exhibit 4.2)(3)

 4.4       Form of Montgomery County Industrial Development Authority
           Federally Taxable Variable Rate Demand Revenue Bond (Neose
           Technologies, Inc. Project) Series B of 1997. (Exhibit
           4.3)(3)

 4.6       Amended and Restated Rights Agreement, dated as of December
           3, 1998, between American Stock Transfer & Trust Company, as
           Rights Agent, and Neose. (Exhibit 4.1)(6)

10.1       Stock Purchase Agreement, dated as of August 28, 1990,
           between University of Pennsylvania and Neose. (Exhibit
           10.1)(1)

10.2       License Agreement, dated as of August 28, 1990, between
           University of Pennsylvania and Neose, as amended to date.
           (Exhibit 10.2)(1)

10.3(a)+   Series D Preferred Stock Purchase Agreement, dated as of
           December 30, 1992, between Abbott Laboratories and Neose.
           (Exhibit 10.8(a))(1)

10.3(b)+   Supply Agreement, dated as of December 30, 1992, between
           Abbott Laboratories and Neose. (Exhibit 10.8(b))(1)

10.3(c)+   Research and License Agreement, dated as of December 30,
           1992, between Abbott Laboratories and Neose. (Exhibit
           10.8(c))(1)

10.3(d)+   Amendment to the Research and License Agreement, dated as of
           January 18, 1995, between Abbott Laboratories and Neose.
           (Exhibit 10.8(d))(2)

10.4       Form of Series E Preferred Stock Investors' Rights
           Agreement. (Exhibit 10.9)(1)

10.5       Form of Series F Preferred Stock Investors' Rights
           Agreement. (Exhibit 10.10)(1)

10.6       Form of Warrant to Purchase Common Stock, dated as of
           February 23, 1991. (Exhibit 10.11)(1)

10.7       Form of Warrant to Purchase Common Stock, dated as of June
           30, 1993. (Exhibit 10.12)(1)

10.8       Form of Warrant to Purchase Common Stock, dated as of
           February 16, 1994. (Exhibit 10.13)(1)

10.9       Form of Warrant to Purchase Series E Preferred Stock, dated
           as of July 29, 1994. (Exhibit 10.14)(1)

10.10      Warrant for the Purchase of Common Stock, dated as of June
           30, 1995, between Financing for Science International, Inc.
           and Neose. (Exhibit 10.15)(1)

10.11++    1995 Stock Option/Stock Issuance Plan, as amended. (Exhibit
           99.1)(4)

10.12++    Employee Stock Purchase Plan. (Exhibit 10.17)(1)

10.13++    Employment Agreement dated April 1, 1992, between David A.
           Zopf and Neose, as amended to date. (Exhibit 10.18)(1)

10.15      Design-Build Agreement dated August 30, 1996, between Irwin
           & Leighton, Inc. and Neose. (Exhibit 10.19)(2)

10.15      Agreement for Purchase and Sale of Real Property, dated
           March 14, 1997, by and between Pennsylvania Business Campus
           Delaware, Inc. and Neose. (Exhibit 2.1)(3)

10.16      Loan Agreement, dated as of March 1, 1997, between
           Montgomery County Industrial Development Authority and
           Neose. (Exhibit 10.1)(3)

10.17      Participation and Reimbursement Agreement, dated as of March
           1, 1997, between Jefferson Bank and CoreStates Bank, N.A.
           (Exhibit 10.2)(3)

10.18      Form of CoreStates Bank, N.A. Irrevocable Letter of Credit.
           (Exhibit 10.3)(3)

10.19      Pledge, Security and Indemnification Agreement, dated as of
           March 1, 1997, by and among CoreStates Bank, N.A., Jefferson
           Bank, and Neose. (Exhibit 10.4)(3)



 EXHIBIT
 NUMBER    DESCRIPTION
 -------   -----------
10.20      Reimbursement Agreement, dated as of March 1, 1997, between
           Jefferson Bank and Neose. (Exhibit 10.5)(3)

10.21      Specimen of Note from Company to Jefferson Bank. (Exhibit
           10.6)(3)

10.22      Mortgage, Assignment and Security Agreement, dated March 20,
           1997, between Jefferson Bank and Neose. (Exhibit 10.7)(3)

10.23      Security Agreement, dated as of March 1, 1997, by and
           between Jefferson Bank and Neose. (Exhibit 10.8)(3)

10.24      Assignment of Contract, dated as of March 20, 1997, between
           Jefferson Bank and Neose. (Exhibit 10.9)(3)

10.25      Custodial and Collateral Security Agreement, dated as of
           March 20, 1997, by and among Offitbank, Jefferson Bank, and
           Neose. (Exhibit 10.10)(3)

10.26      Placement Agreement, dated March 20, 1997, among Montgomery
           County Industrial Development Authority, CoreStates Capital
           Markets, and Neose. (Exhibit 10.11)(3)

10.27      Remarketing Agreement, dated as of March 1, 1997, between
           CoreStates Capital Markets and Neose. (Exhibit 10.12)(3)

10.28      Form of Purchase Agreement dated as of June 25, 1999,
           between Neose Technologies, Inc. and the purchasers set
           forth on the signature pages thereto. (Exhibit 99.1)(7)

10.29      Form of Amended and Restated Purchase Agreement dated as of
           June 25, 1999, between Neose Technologies, Inc. and the
           purchasers set forth on the signature pages thereto.
           (Exhibit 99.2)(7)

10.30**    Research and Development Agreement, dated June 1, 1998,
           between Neose Technologies, Inc. and the Pharmaceutical
           Research Institute of Bristol-Myers Squibb Company. (Exhibit
           99.1)(8)

10.31**    Operating Agreement of Magnolia Nutritionals LLC, dated
           October 12, 1999, between Neose Technologies, Inc. and
           McNeil PPC, Inc. acting through its division McNeil
           Specialty Products Company. (Exhibit 99.2)(8)

10.32**    Collaboration and License Agreement, dated November 3, 1999,
           between Neose Technologies, Inc. and American Home Products
           Corporation. (Exhibit 99.3)(8)

11*        Statement re: Computation of Net Loss Per Common Share.

23.1*      Consent of Arthur Andersen LLP.

24*        Powers of Attorney (included as part of signature page
           hereof).

27.1*      Financial Data Schedule.

- ------------------

*     Filed herewith

**    Portions of this Exhibit were omitted and filed separately
      with the Secretary of the SEC pursuant to a request for
      confidential treatment that has been filed with the SEC.

+     Portions of this Exhibit were omitted and filed separately
      with the Secretary of the SEC pursuant to an order of the
      SEC granting our application for confidential treatment
      filed pursuant to Rule 406 under the Securities Act.

++    Compensation plans and arrangements for executives and
      others.

(1)   Filed as an Exhibit to our Registration Statement on Form
      S-1 (Registration No. 33-80693) filed with the SEC on
      December 21, 1995, as amended.

(2)   Filed as an Exhibit to our Registration Statement on Form
      S-1 (Registration No. 333-19629) filed with the SEC on
      January 13, 1997.

(3)   Filed as an Exhibit to our Quarterly Report on Form 10-Q for
      the quarterly period ended March 31, 1997.

(4)   Filed as an Exhibit to our Registration Statement on Form
      S-8 (Registration No. 333-35283) filed with the SEC on
      September 10, 1997.

(5)   Filed as an Exhibit to our Current Report on Form 8-K filed
      with the SEC on October 1, 1997.

(6)   Filed as an Exhibit to our Current Report on Form 8-K filed
      with the SEC on January 8, 1999.

(7)   Filed as an Exhibit to our Current Report on Form 8-K filed
      with the SEC on July 14, 1999.

(8)   Filed as an Exhibit to our Current Report on Form 8-K filed
      with the SEC on February 2, 2000.

EX-11

                                   EXHIBIT 11

               Computation of Pro Forma Net Loss Per Common Share
                     (In thousands, except per share data)


                                        Year Ended December 31,
                                 --------------------------------------
                                   1997           1998           1999
                                 --------------------------------------
Net Loss ................        $(9,064)       $(11,907)     $(13,318)
                                 ======================================
Basic and diluted
weighted-average
shares outstanding ......          9,405           9,556         10,678
                                 ======================================

Basic and diluted net
loss per share ..........        $ (0.96)       $  (1.25)     $  (1.25)
                                 ======================================

EX-23.1

                                                                    Exhibit 23.1

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation of our
report dated January 28, 2000 included in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 333-01410, 333-35283,
333-83925 and 333-88913.



                                             /s/ ARTHUR ANDERSEN LLP


Philadelphia, Pa.
  February 23, 2000

EX-27

 

<ARTICLE>                     5
<MULTIPLIER>                                   1,000

                             
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                         DEC-31-1999
<PERIOD-END>                              DEC-31-1999
<CASH>                                         10,365
<SECURITIES>                                   22,870
<RECEIVABLES>                                       0
<ALLOWANCES>                                        0
<INVENTORY>                                         0
<CURRENT-ASSETS>                               35,638
<PP&E>                                         18,998
<DEPRECIATION>                                  5,632
<TOTAL-ASSETS>                                 52,239
<CURRENT-LIABILITIES>                           4,154
<BONDS>                                         7,300
<PREFERRED-MANDATORY>                               0
<PREFERRED>                                         0
<COMMON>                                          114
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<TOTAL-LIABILITY-AND-EQUITY>                   52,239
<SALES>                                             0
<TOTAL-REVENUES>                                  422
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<INTEREST-EXPENSE>                                433
<INCOME-PRETAX>                               (13,318)
<INCOME-TAX>                                        0
<INCOME-CONTINUING>                           (13,318)
<DISCONTINUED>                                      0
<EXTRAORDINARY>                                     0
<CHANGES>                                           0
<NET-INCOME>                                  (13,318)
<EPS-BASIC>                                   (1.25)
<EPS-DILUTED>                                   (1.25)